1 Filed by Petrohawk Energy Corporation (Commission File No. 000-25717) Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934 Subject Company: KCS Energy, Inc. (Commission File No. 001-13781) The following is a joint slide presentation first presented by Petrohawk Energy Corporation and KCS Energy, Inc. on April 26, 2006: |
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3 Forward-looking Statements This presentation contains "forward-looking statements" within the meaning
of the US Private Securities Litigation Reform Act of 1995, based on Petrohawks and KCSs current expectations and include statements regarding planned capital expenditures
(including the amount and nature thereof), timing for proposed acquisitions and divestitures, estimates of future production, statements regarding business plans and timing for drilling and exploration expenditures, the number of wells both companies anticipate drilling in 2006, the number and nature of potential drilling locations, future results of operations, quality and nature of the combined asset base, the assumptions upon which estimates are based and other expectations,
beliefs, plans, objectives, assumptions, strategies or statements about
future events or performance (often, but not always, using words such as "expects", "anticipates", "plans", "estimates",
potential, possible, probable, or "intends", or stating that certain actions, events or results "may", "will", should, or could be taken, occur or be achieved). Statements concerning oil and gas reserves also may be deemed to be forward looking statements in that they reflect estimates based on certain assumptions that the
resources involved can be economically exploited. Forward-looking statements are based on current expectations, estimates and projections that involve a
number of risks and uncertainties, which could cause actual results to
differ materially from those, reflected in the statements. These risks include, but are not limited to: the possibility that the companies may be unable to obtain stockholder or other approvals required for the acquisition; the possibility that problems may arise in the integration of the
businesses of the two companies; the possibility that the acquisition may
involve unexpected costs; the possibility the combined company may be unable to achieve cost-cutting objectives; the risks of the oil and gas industry (for example,
operational risks in exploring for, developing and producing crude oil and
natural gas; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or
changes in plans with respect to exploration or development projects or
capital expenditures; health, safety and environmental risks and risks related to weather such as hurricanes and other natural disasters); uncertainties as to the availability and cost of financing; fluctuations in oil and gas
prices; inability to realize expected value from acquisitions, inability of
our management team to execute its plans to meet its goals, shortages of drilling equipment, oil field personnel and services, unavailability of gathering systems, pipelines and processing facilities and the possibility that
government policies may change or governmental approvals may be delayed or withheld. Additional information on these and other factors which could affect either companies operations or financial results are included in the companies other reports on file with the United States Securities and Exchange Commission.
Forward-looking statements are based on the estimates and opinions of
both companies management at the time the statements are made.
Neither Petrohawk nor KCS assume any obligation to update
forward-looking statements should circumstances or management's estimates or opinions change. In its filings with the Securities and Exchange Commission, Petrohawk is permitted to
disclose only proved reserves that it has demonstrated by actual production
or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Petrohawk uses certain terms in this presentation, such as "potential" in relation to reserves
that the SEC's guidelines strictly prohibit it from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved
reserves and accordingly are subject to substantially greater risk of
the Company not actually realizing them. Investors are urged to closely consider Petrohawk's disclosure of its proved reserves, along with certain risks and uncertainties inherent in its business, set forth in its filings with the SEC.
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4 Additional Information Additional Information About the Transaction and Where to Find It: Petrohawk and KCS will file materials relating to the transaction with the SEC,
including one or more registration statement(s) that contain a prospectus
and a joint proxy statement. Investors and security holders of Petrohawk and KCS are urged to read these documents (if and when they become available) and any other
relevant documents filed with the SEC, as well as any amendments or
supplements to those documents, because they will contain important information about Petrohawk, KCS and the transaction. Investors and security holders may obtain these documents free of
charge at the SEC's website at www.sec.gov. In addition, the documents filed with the SEC by Petrohawk may be obtained free of charge from Petrohawk's website at www.petrohawk.com. The documents filed with the SEC by KCS may be obtained
free of charge from KCS's website at www.kcsenergy.com. Investors and security holders are urged to read the
joint proxy statement/prospectus and the other relevant materials when they
become available before making any voting or investment decision with respect to the proposed acquisition. Petrohawk, KCS and their respective executive officers and directors may be deemed to be
participants in the solicitation of proxies from the stockholders of
Petrohawk and KCS in favor of the acquisition. Information about the executive officers and directors of Petrohawk and their direct or indirect interests, by security holdings or
otherwise, in the acquisition will be set forth in the proxy
statement-prospectus relating to the acquisition when it becomes available. Information about the executive officers and directors of KCS and Petrohawk and their direct or indirect
interests, by security holdings or otherwise, in the acquisition will be set
forth in the proxy statement-prospectus relating to the acquisition when it becomes available. |
5 Unparalleled Assets Positioned to be one of the most concentrated property portfolios among large-cap
E&P companies Combined position in North Louisianas Elm Grove and Caspiana fields creates a premier position in an evolving natural gas basin Sets Petrohawk apart as a dominant operator in Onshore Gulf Coast region A virtual overlay of core operating areas, and the combination of experienced
technical staff to complement development and exploration potential Well-Capitalized Operating Platform Appropriate use of leverage with well-developed plan to enhance balance sheet
and operating statistics Increased capital availability to apply over larger opportunity set of properties
Value Creation Immediately accretive to cash flow, production and NAV on a per share basis HAWK + KCS: A Powerful Combination |
6 Deal Overview Petrohawk Energy Corporation Houston, Texas NASDAQ: HAWK Floyd C. Wilson, Chairman, President and CEO KCS Energy, Inc. Houston, Texas NYSE: KCS James W. Christmas, Chairman and CEO Pro Forma Ownership 50% HAWK / 50% KCS 9-member board, 5 HAWK, 4 KCS Expect to close Q3 2006 Fixed Exchange Ratio 1.65 (HAWK shares per KCS share) Fixed Cash Value per Share $9.00 Implied Offer Price / Share at 4/20/06 $31.41 (HAWK at $13.58 /share at 4/20/06) % Implied Premium 9.60% (KCS at $28.66 /share) % Stock 72 % Cash 28 ($ millions) Cash Consideration 450 $ HAWK Shares Issued (MM) 83.7 Stock Consideration 1,137 $ Total Equity Consideration 1,587 $ Net Assumed Debt 309 $ Total Transaction Value 1,896 $ Offer Summary Implied Transaction Value Combination Attributes Creates one of the most concentrated asset portfolios among large-cap E&P Immediately accretive on cash flow, production and NAV per share Unites experienced technical staffs Significant development and exploration potential from a virtual overlay of core operating areas |
7 HAWK + KCS: A Powerful Combination 1 Tcfe of Proved Reserves 82% gas 68% proved developed 74% operated 900 proved drilling locations $3.2 billion SEC PV10 291 Mmcfe/d current production 9.2 year R/P Multi-year development drilling inventory ~3 Tcfe of Upside Potential over 4,000 identified non- proved drilling locations KCS and HAWK reserves as of 12/31/05 proforma 2006 year-to-date acquisitions and divestments. |
8 HAWK + KCS: Top 15 Fields Proved Reserves % of PV 10 % of Region (Bcfe) Proved (MM$) PV 10 East Texas / North Louisiana 341 29% 1,235 38% (Elm Grove / Caspiana, Terryville, Joaquin) Permian 172 15% 441 14% (Waddell, Sawyer Canyon, Jalmat, TXL) South Texas / Gulf Coast 67 6% 298 9% (La Reforma, Lions, Provident City, O'Connor Ranch, Marshall) Anadarko 33 3% 117 4% (WEHLU, Latimer Cty) Top 15 Fields 1182.4 65% |
9 HAWK + KCS: Key Statistics Pro Forma All information pro forma GOM divestment (HAWK), and Winwell (HAWK) and Terryville (KCS) acquisitions. Production is as of April 2006 pro forma for these transactions. Resource Potential does not include exploratory upside Proved Reserves (Bcfe) 517 463 980 SEC PV-10 ($MM) $1,509 $1,698 $3,207 Proved Developed % 64% 73% 68% Gas % 76% 88% 82% Operated % 60% 86% 74% Current Production (Mmcfe/d) 133 158 291 R/P (years) 10.6 8.0 9.2 2006E CAPEX Budget ($MM) $210 $315 $525 Resource Potential (Bcfe) 950 770 1,720 |
10 Total Production (Mmcfe/d) Hawk 19 65 25 21 3 133 KCS 80 34 15 14 15 158 Total 99 99 40 35 18 291 Proved Reserves (Bcfe) Hawk 122 136 177 74 8 517 KCS 234 90 63 35 41 463 Total 356 226 240 109 49 980 CAPEX Budget ($MM) Hawk 51 110 18 31 - 210 KCS 158 72 40 28 17 315 Total 209 182 59 58 17 525 Value (SEC PV10, $MM) Hawk 314 556 399 217 23 1,509 KCS 972 329 167 124 106 1,698 Total 1,286 885 566 341 128 3,207 Rigs Drilling Hawk 3 4 1 2 - 10 KCS 7 3 3 2 1 16 Total 10 7 4 4 1 26 1st Qtr Drilling (# wells) Hawk 15 12 13 16 10 66 KCS 28 9 12 5 3 57 Total 43 21 25 21 13 123 Other E. Texas / N. Louisiana S. Texas / Gulf Coast Permian Anadarko / Arkoma HAWK + KCS: Regional Breakout |
11 Combined $525 million drilling budget for 2006 ~85% operated Funded from discretionary cash flow Attractive risk profile Total 2006 Drilling Budget by Category ($MM / % of Total) Total 2006 Drilling Budget by Region ($MM / % of Total) Non-Proved $179 / 34% Proved $346 / 66% Permian $59 / 11% S. TX / Gulf Coast $198 / 38% E. TX / N. LA $209 / 40% Arkoma / Anadarko $58 / 11% HAWK + KCS: 2006 Drilling Budget |
12 Petrohawks Growth through Acquisitions 0 200 400 600 800 1,000 1,200 May 2004 November 2004 February 2005 July 2005 January 2006 April 2006 Beta Oil & Gas 30 Bcfe Wynn Crosby Energy 200 Bcfe Proton Energy 28 Bcfe Mission Resources 226 Bcfe Winwell Resources 106 Bcfe KCS Energy 463 Bcfe (Closing Expected Q3 2006) |
13 Dec. 31, 2004 Reserves 219 Bcfe 2005 Divestments (29) Bcfe 2005 Production (29) Bcfe - Bcfe 2005 Organic Growth = 437 Bcfe 152% 2005 reserve replacement Development Drilling: Identify and Exploit Opportunities Focus on underdeveloped properties with upside and acceleration potential Exploration Program: Drill Well-Known Basins and Formations Technology-driven with exposure to conventional and unconventional plays + 44 Bcfe 2005 Year-End Reserve Estimate (1) 1 At December 31, 2005, NSAI 2005 Acquisitions 233 Bcfe Petrohawks Growth through the Drill Bit |
14 KCSs Growth through the Drill Bit Wells Drilled 53 78 130 193 2002 2003 2004 2005 (% Successful) Drilling Success 74% 92% 97% 93% 2002 2003 2004 2005 92% Drilling success over 4 years (454 wells) Drilled 193 wells in 2005 with 93% success Initial Budget of 215 Wells for 2006 Average ~30% reserve growth per year 3 year F&D Cost - $1.59 / Mcfe Multi-Year Drilling Inventory |
15 Significant Value in Upside Potential Extensive portfolio of growth opportunities All located in existing basins Combined company is estimated to have ~3 Tcfe of upside East Texas / North Louisiana 356 600 600 S. Texas / Gulf Coast 226 600 200 Permian 240 200 - Anadarko / Arkoma 109 300 500 Other 49 20 20 Total 980 1,720 1,320 Exploration Potential (Bcfe) Proved (Bcfe) Resource Potential (Bcfe) Note: Resource and exploration potential are unrisked internal estimates only and vary with time and drilling results.
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16 A Compelling Combination: E. TX/No. LA Region 99 Mmcfe/d production 356 Bcfe proved reserves $209 Million Budget 10 Rigs Active: 43 Wells Drilled in Q1 SHELBY RUSK PANOLA HARRISON MARION CAMP GREGG DE SOTO HENDERSON VAN ZANDT BENVILLE CLAIBORNE LINCOLN QUACHITA MARION WASHINGTON Joaquin Carthage, S. Blocker Caspiana Elm Grove Longwood Terryville Unionville Drew S. Elm Grove Caspiana James Lime Project Benson Petrohawk KCS |
17 Largest operator in Elm Grove / Caspiana 125 Mmcfe/d gross operated 6 operated rigs Long-lived legacy natural gas asset Substantial upside potential 67,720 gross acres $133 million capex planned in 2006 3 HAWK-operated rigs, 3 KCS-operated rigs Ongoing multi-year drilling program Over 1,000 drilling locations identified Premier Asset: Elm Grove / Caspiana Fields Petrohawk KCS |
18 Petrohawk KCS CAMERON CALCASIEU JEFFERSON DAVIS TERREBONNE LAFOURCHE ST. BERNARD WASHINGTON MARION JEFFERSON DAVIS HARRIS GALVESTON WHARTON DE WITT GOLIAD VICTORIA LIMESTONE FREESTONE MADISON Cypress/Langham Cross Creek Dickinson Chocalate Bayou Magnet Withers Porters Creek Austin Deep Betsy Marshall E. Marshall OConnor Ranch Lions Glasscock Ranch Heard Ranch Mission Valley Provident City N. Borchers Dry Hollow Provident City La Jara Los Midios La Reforma La Reforma Nabors Ann Mag Coquat SHELBY RUSK PANOLA Back Ridge W. Chalkley Second Bayou Broussard Reddell W.Lake Verret S.Bayou Boeuf S.W.Lake Boeu Gueydan N. Leroy A Compelling Combination: S. Texas / Gulf Coast 99 Mmcfe/d production 226 Bcfe proved reserves $182 Million Budget 7 Rigs Active: 21 Wells Drilled Q1 |
19 Premier Asset: 3D in South Texas / Gulf Coast 3D Coverage and Joint Ventures in 3D Exploration Plays c |
20 Petrohawk KCS SUTTON EDWARDS LEA ANDREWS EDDY LOVING Waddell ROC TXL Sawyer Canyon Haley W.Shugart. A Compelling Combination: Permian 40 Mmcfe/d production 240 Bcfe proved reserves $59 Million Budget 4 Rigs Active: 25 Wells Drilled in Q1 Jalmat S. Kemnitz. |
21 Panola Talihina, NW Wilburton LE FLORE LATIMER YELL PITTSBURG HUGHES HASKELL CANADIAN WASHITA WHEELER ROBERTS UPSCOMB ELLIS WOODWARD OCHIL TREE BEAVER HARPER HANSFORD Kinta Mayfield, NE Carpenter Fitts S. Pine Hollow Fayetteville Shale Caney / Woodford Shale Flower Prospect A Compelling Combination: Anadarko / Arkoma Petrohawk KCS 35 Mmcfe/d production 109 Bcfe proved reserves $58 Million Budget 1-4 Rigs Active: 21 Wells Drilled in Q1 Lipscomb |
22 Pro Forma Capitalization Expected Mix of Financing Committed Funding - $1.5B BNP Paribas Revolving Credit Facility (combined HAWK and KCS reserves) $1.25 billion facility, $850 900MM Initial Borrowing Base LIBOR + 1.50% (based on current facility) $125 - $175MM of projected liquidity (depending on 2nd Lien Draw) Second Lien Facility / High Yield $600 650MM Pro forma Debt / Total Cap of approximately 43% Pro forma EBITDA / Interest of approximately 6.5x Pro forma capitalization subject to change |
23 Hedge Schedule As of 4/20/06. Average prices are volume-weighted. Collars 17,255,000 $6.69 $10.01 10,150,000 $6.79 $12.29 3,600,000 $5.05 $6.53 Swaps 7,910,000 $7.33 3,455,000 $7.18 Puts 4,068,625 $8.00 7,249,995 $8.00 Collars 1,130,400 $40.33 $53.44 294,100 $41.13 $50.11 60,000 $34.00 $45.30 Swaps 122,000 $54.21 36,000 $63.85 144,000 $38.10 Current Combined Hedging Schedule 2007 GAS GAS GAS 2008 Floor Ceiling Volume (Bbls) 2006 Floor Ceiling OIL OIL OIL Volume (MMbtu) Floor Ceiling Volume (MMbtu) Volume (MMbtu) Volume (Bbls) Floor Ceiling Floor Ceiling Volume (Bbls) Floor Ceiling |
24 HAWK + KCS: Summary Continue Proven Strategies of Both Companies Acquire Strategically Operated, gas-biased properties in core areas with upside potential Acquire as much upside as proved Organic Growth Focus on underdeveloped properties with upside and acceleration potential Technology-driven with exposure to conventional and unconventional plays Active Portfolio Management Divest high-cost, non-operated properties with limited upside Maintain Financial Flexibility Build to Sell Combined management group will own approximately 6% of the company
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25 HAWK + KCS: Comparables Production Rankings Current Daily Prod. Rank Company (MMcfe/d) 1 Devon Energy 3,476.1 2 Apache Corp 2,977.7 3 Anadarko Petroleum Corp. 2,574.0 4 Kerr-McGee 1,472.6 5 Chesapeake Energy 1,471.3 6 XTO Energy Inc. 1,433.0 7 EOG Resources 1,429.6 8 Noble Energy Inc. 956.3 9 Newfield Exploration 662.1 10 Pioneer Natural Resources 600.7 11 Pogo Producing Co. 519.0 12 Cimarex Energy Co. 431.1 13 Forest Oil Corp. 386.1 14 Plains Explor. & Prod. 377.4 15 W&T Offshore 298.2 16 Pro Forma Petrohawk 291.1 17 Houston Exploration 285.5 18 Range Resources Corp. 250.3 19 Cabot Oil & Gas Corp. 250.0 20 Whiting Petroleum Corp. 240.1 21 St. Mary Land & Expl. 237.6 22 Ultra Petroleum Corp. 232.0 23 Denbury Resources Inc. 189.8 24 Encore Acquisition Co. 183.9 25 Southwestern Energy Co. 171.1 28 KCS (1) 155.7 31 Petrohawk (1) 135.4 (1) Daily Production as of February, 2006 pro forma for GOM divestment (HAWK), and Winwell (HAWK) and Terryville (KCS) acquisitions Reserve Rankings 12/31/2005 Reserves Rank Company (Bcfe) 1 Anadarko Petroleum Corp. 14,690 2 Apache Corp 13,846 3 Devon Energy 12,672 4 XTO Energy Inc. 7,742 5 Chesapeake Energy 7,600 6 EOG Resources 6,200 7 Kerr-McGee 5,805 8 Pioneer Natural Resources 5,194 9 Noble Energy Inc. 5,084 10 Plains Explor. & Prod. 2,406 11 Pogo Producing Co. 2,317 12 Newfield Exploration 2,001 13 Whiting Petroleum Corp. 1,582 14 Ultra Petroleum Corp. 1,528 15 Forest Oil Corp. 1,467 16 Range Resources Corp. 1,407 17 Cimarex Energy Co. 1,393 18 Cabot Oil & Gas Corp. 1,331 19 Encore Acquisition Co. 1,174 20 CNX Gas Corp 1,130 21 Quicksilver Resources 1,100 22 Pro Forma Petrohawk 980 23 Denbury Resources Inc. 915 24 W&T Offshore 854 25 St. Mary Land & Expl. 794 32 Petrohawk 517 34 KCS 464 Note: 12/31/05 proved reserves, pro forma for any subsequent transactions |
26 HAWK + KCS: Comparables Enterprise Value Rankings Enterprise Value (1) Rank Company ($MM) 1 Devon Energy $35,177 2 Anadarko Petroleum Corp. $29,425 3 Apache Corp $29,072 4 XTO Energy Inc. $21,068 5 Chesapeake Energy $20,984 6 EOG Resources $19,686 7 Kerr-McGee $13,235 8 Noble Energy Inc. $11,055 9 Ultra Petroleum Corp. $10,991 10 Newfield Exploration $7,107 11 Pioneer Natural Resources $5,951 12 Pogo Producing Co. $5,487 13 Denbury Resources Inc. $4,809 14 Range Resources Corp. $4,683 15 CNX Gas Corp $4,527 16 Cimarex Energy Co. $4,318 17 W&T Offshore $4,259 18 Quicksilver Resources $4,160 19 Plains Explor. & Prod. $4,152 20 Pro Forma Petrohawk $3,512 21 Forest Oil Corp. $3,304 22 St. Mary Land & Expl. $3,066 23 Cabot Oil & Gas Corp. $2,939 24 Whiting Petroleum Corp. $2,578 25 Encore Acquisition Co. $2,301 28 KCS $1,847 30 Petrohawk $1,665 (1) As of 4/21/06 Gas Percentage Rankings % Gas of Top 25 Rank Company EV 1 CNX Gas Corp 100% 2 Quicksilver Resources 97% 3 Cabot Oil & Gas Corp. 95% 4 Ultra Petroleum Corp. 93% 5 Chesapeake Energy 92% 6 EOG Resources 89% 7 Pro Forma Petrohawk 82% 8 XTO Energy Inc. 80% 9 Range Resources Corp. 80% 10 Cimarex Energy Co. 72% 11 Newfield Exploration 70% 12 Noble Energy Inc. 63% 13 Kerr-McGee 63% 14 Forest Oil Corp. 60% 15 Devon Energy 58% 16 W&T Offshore 57% 17 Pogo Producing Co. 57% 18 Pioneer Natural Resources 56% 19 Apache Corp 54% 20 Anadarko Petroleum Corp. 54% 21 St. Mary Land & Expl. 52% 22 Denbury Resources Inc. 30% 23 Whiting Petroleum Corp. 24% 24 Encore Acquisition Co. 24% 25 Plains Explor. & Prod. 11% - KCS 88% - Petrohawk 76% |
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