10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

Commission file number 000-25717

PETROHAWK ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	86-0876964
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

1100 Louisiana, Suite 4400, Houston, Texas 77002
(Address of principal executive offices including ZIP code)

(832) 204-2700
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

	Name of each exchange
Title of each class	on which registered
Common Stock, par value $.001 per share	NASDAQ National Market

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o                 Accelerated filer þ                Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of Common Stock, par value $.001 per share (Common Stock), held by non-affiliates (based upon the closing sales price on the NASDAQ National Market on June 30, 2005), the last business day of registrant’s most recently completed second fiscal quarter was approximately $418 million.

As of March 7, 2006, there were 83,264,331 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Stockholders to be filed on or before April 28, 2006 are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this report on Form 10-K.

TABLE OF CONTENTS

	PAGE
PART I
ITEM 1. Business		4
ITEM 1A. Risk factors		15
ITEM 1B. Unresolved staff comments		21
ITEM 2. Properties		21
ITEM 3. Legal proceedings		21
ITEM 4. Submission of matters to a vote of security holders		21
PART II
ITEM 5. Market for registrant’s common equity and related stockholder matters		22
ITEM 6. Selected historical financial data		23
ITEM 7. Management’s discussion and analysis of financial condition and results of operations		24
ITEM 7A. Quantitative and qualitative disclosures about market risk		39
ITEM 8. Consolidated financial statements and supplementary data		42
ITEM 9. Changes in and disagreements with accountants on accounting and financial disclosure		84
ITEM 9A. Controls and procedures		84
ITEM 9B. Other information		84
PART III
ITEM 10. Directors and executive officers of the registrant		85
ITEM 11. Executive compensation		85
ITEM 12. Security ownership of certain beneficial owners and management and related stockholder matters		85
ITEM 13. Certain relationships and related transactions		85
ITEM 14. Principal accounting fees and services		85
PART IV
ITEM 15. Exhibits, financial statement schedules		86
First Amendment to Asset Purchase Agreement
Assignment Agreement
Form of Stock Option Agreement
First Amendment to Amended Senior Revolving Credit Agreement
First Amendment to Amended Second Lien Term Loan Agreement
Stock Purchase Agreement
Placement Agreement
Subsidiaries of the Registrant
Consent of Deloitte & Touche LLP
Consent of Ernst & Young LLP
Consent of Netherland, Sewell & Associates, Inc.
Certificate of CEO Pursuant to Section 302
Certificate of CFO Pursuant to Section 302
Certifications Pursuant to Section 1350

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This report on Form 10-K and the documents or information incorporated by reference herein contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, among others, the following:

• our growth strategies;

• anticipated trends in our business;

• our future results of operations;

• our ability to make or integrate acquisitions;

• our liquidity and ability to finance our exploration, acquisition and development activities;

• our ability to successfully and economically explore for and develop oil and gas resources;

• market conditions in the oil and gas industry;

• the timing, cost and procedure for proposed acquisitions;

• the impact of government regulation;

• estimates regarding future net revenues from oil and natural gas reserves and the present value thereof;

• planned capital expenditures (including the amount and nature thereof);

• increases in oil and gas production;

• the number of wells we anticipate drilling in the future;

• estimates, plans and projections relating to acquired properties;

• the number of potential drilling locations; and

• our financial position, business strategy and other plans and objectives for future operations.

We identify forward-looking statements by use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “hope,” “plan,” “believe,” “predict,” “envision,” “intend,” “will,” “continue,” “potential,” “should,” “confident,” “could” and similar words and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual results could differ materially from those contained in the forward-looking statements. You should consider carefully the statements under the “Risk Factors” section of this report and other sections of this report which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements, and the following factors:

• the possibility that our acquisitions may involve unexpected costs;

• the volatility in commodity prices for oil and gas;

• the accuracy of internally estimated proved reserves;

• the presence or recoverability of estimated oil and gas reserves;

• the ability to replace oil and gas reserves;

• the availability and costs of drilling rigs and other oilfield services;

• environmental risks;

• exploration and development risks;

• competition;

• the inability to realize expected value from acquisitions;

• the ability of our management team to execute its plans to meet its goals;

• general economic conditions, whether internationally, nationally or in the regional and local market areas in which we are doing business, that may be less favorable than expected; and

• other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors that may negatively impact our businesses, operations and pricing.

Forward-looking statements speak only as of the date of this report or the date of any document incorporated by reference in this report. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

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PART I

ITEM 1. BUSINESS

Overview

Petrohawk Energy Corporation (Petrohawk or the Company), a Delaware corporation, is an independent oil and gas company engaged in the acquisition, development, production and exploration of oil and gas properties located in North America. We were formed in June 1997 as a Nevada corporation and were reincorporated in the state of Delaware in July 2004. Our properties are concentrated in the Permian Basin, East Texas/North Louisiana, Gulf Coast, South Texas, Anadarko and Arkoma regions. We have increased our proved reserves and production principally through acquisitions in conjunction with an active drilling program. Since November 2004, we have acquired approximately 535 billion cubic feet of natural gas equivalent (Bcfe) of proved reserves for approximately $1.2 billion, including the recently completed North Louisiana Acquisitions discussed below. During 2005, excluding acquisitions, we replaced approximately 149% of our production organically. Organic reserve additions were primarily driven by 3D seismic supported exploratory drilling in our core regions of South Texas and the Gulf Coast, as well as continuing evaluation of several fields in the Permian Basin. Fields that contributed significantly to the growth were the Lions (Goliad County, Texas); Waddell Ranch (Crane County, Texas); TXL (Ector County, Texas); Provident City (Colorado County, Texas); and Gueydan (Vermillion Parish, Louisiana). During 2005, we participated in the drilling of 146 wells, of which nine were dry holes, for a success rate of 94%.

At December 31, 2005, excluding the North Louisiana Acquisitions, our estimated total proved oil and gas reserves were approximately 437.3 Bcfe, consisting of 29.2 million barrels of oil (MMBbls) and 261.9 billion cubic feet (Bcf) of natural gas. Approximately 61% of our proved reserves were classified as proved developed.

We exited the year with an estimated daily production rate of approximately 130 million cubic feet equivalent (Mmcfe/d). This exit rate does not include an estimated 6 Mmcfe/d that remains shut-in from hurricane-related disruptions, and approximately 4 Mmcfe/d which is constrained in South Texas due to capacity issues. We currently expect shut-in production to return and capacity issues to be resolved during the first quarter or early second quarter of 2006.

We focus on maintaining a balanced, geographically diverse portfolio of long-lived, lower risk reserves along with shorter lived, higher margin reserves. We believe that this balanced reserve mix provides a diversified cash flow foundation to fund our development and exploration drilling program.

Recent Developments

We have recently completed several transactions:

Gulf of Mexico Divestiture

On February 3, 2006, we entered into a definitive agreement with Northstar GOM, LLC to sell substantially all of our Gulf of Mexico properties for $52.5 million in cash. These properties have estimated proved reserves as of December 31, 2005 of approximately 25 Bcfe, are approximately 70% gas, 59% proved developed and 27% operated. Current production is estimated to be approximately 10 Mmcfe/d. The transaction is expected to close by March 31, 2006.

The North Louisiana Acquisitions

On January 27, 2006, we completed the acquisition of all of the issued and outstanding common stock of Winwell Resources, Inc. (Winwell). The aggregate consideration paid was approximately $208 million in cash after certain closing adjustments. Also on January 27, 2006, we completed an acquisition of assets from Redley Company (Redley). The aggregate consideration paid was approximately $86 million in cash after certain closing adjustments. Through the Winwell and Redley transactions (referred to herein as the North Louisiana Acquisitions), we acquired gas properties in the Elm Grove and Caspiana fields in North Louisiana.

     Reserve and production highlights of the North Louisiana Acquisitions include the following internal estimates:

• 106 Bcfe total proved reserves (98% gas, 29% proved developed) at December 31, 2005;

• 27,400 gross acres with 250 identified drilling locations;

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• 18-year reserve-to-production ratio based on average net daily production for December 2005 and internally estimated net proved reserves as of December 31, 2005;

• Average 2006 projected production of 20 Mmcfe/d;

• Production of approximately 16 Mmcfe/d for December 2005;

• 80% operated; and

• Lease operating expense of approximately $0.55/Mmcfe projected for 2006.

We believe the properties present a significant, multi-year development opportunity primarily in the Cotton Valley and Hosston formations at depths of 6,500 to 10,000 feet. Successful wells in these fields generally produce for more than thirty years and have low operating costs. Our 2006 capital budget of $210 million includes approximately $35 million to accelerate development in these fields.

In conjunction with the closing of these transactions, we amended our senior revolving credit facility agreement and our second lien term loan facility. See the Contractual obligations section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more details.

Mission Resources Corporation

We acquired Mission Resources Corporation (Mission) by merger on July 28, 2005. As a result of the Mission merger, we issued approximately 19.565 million shares of common stock and paid approximately $139.5 million in cash to the former stockholders of Mission. In addition, all outstanding options to purchase Mission common stock were converted into options to purchase Petrohawk common stock using the exchange ratio of 0.7641 shares of Petrohawk common stock per share of Mission common stock underlying each option. We also assumed Mission’s long-term debt of approximately $184 million. At December 31, 2004, Mission’s estimated net proved reserves were approximately 226 Bcfe.

Major properties in the asset base included interests in three significant fields in the Permian Basin. The Jalmat field in Lea County, New Mexico, had approximately 56 Bcfe of estimated proved reserves; the Waddell Ranch field in Crane County, Texas had approximately 45 Bcfe of estimated proved reserves; and the TXL Field in Ector County, Texas had approximately 24 Bcfe of estimated proved reserves. Mission also owned significant interests in the Gulf Coast and South Texas regions.

Proton Oil & Gas Corporation

On February 25, 2005, we completed the purchase of Proton Oil & Gas Corporation (Proton) for approximately $53 million. This privately negotiated transaction included internally estimated proved reserves of approximately 28 Bcfe and had an economic effective date of January 1, 2005. The Proton properties are located in South Louisiana and South Texas.

Major properties in the asset base included interests in the Gueydan field in Vermilion Parish, Louisiana, with 16 Bcfe of estimated proved reserves, 1,018 gross acres and nine proved undeveloped (PUD) locations. In South Texas, significant properties included interests in the Heard Ranch field in Bee County, Texas with approximately 7 Bcfe of estimated proved reserves, 4,230 gross acres and 15 PUD locations. The acquisition also included 3-D seismic data covering all major properties.

Sale of Royalty Interest Properties

On February 25, 2005, we completed the disposition of 26 Bcfe of estimated proved reserves of certain royalty interest properties with estimated production of approximately 5 Mmcfe/d for approximately $80 million in cash.

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Business Strategy

We are an independent oil and gas company engaged in the acquisition, development, production and exploration of oil and gas properties located in North America. Our primary objective is to increase shareholder value. To accomplish this objective, our business strategy is focused on the following:

• Pursuit of Strategic Acquisitions. We continually review opportunities to acquire producing properties, leasehold acreage and drilling prospects. We seek negotiated transactions to acquire operational control of properties that we believe have significant exploitation and exploration potential. Our strategy includes a significant focus on increasing our holdings in fields and basins in which we already own an interest.

• Further Exploitation of Existing Properties. We seek to add proved reserves and increase production through the use of advanced technologies, including detailed reservoir engineering analysis, drilling development wells utilizing sophisticated techniques and selectively recompleting existing wells. We also focus on reducing the per unit operating costs associated with our properties. We believe that many of the properties we have acquired have significant potential and in certain cases have not been actively developed in the past.

• Growth Through Exploration. We conduct an active technology-driven exploration program that is designed to complement our property acquisition and development drilling activities with moderate to high risk exploration projects that may have greater reserve potential.

• Property Portfolio Management. We continually evaluate our property base to identify opportunities to divest non-core, higher cost or less productive properties with limited development potential. This strategy allows us to focus on a portfolio of core properties with significant potential to increase our proved reserves and production.

• Maintenance of Financial Flexibility. We intend to maintain substantial borrowing capacity under our senior revolving credit facility. We believe our internally generated cash flows, our borrowing capacity and access to the capital markets will provide us with the financial flexibility to pursue additional acquisitions of producing properties and leasehold acreage and to execute our drilling program. Another component of our financial management strategy includes the use of hedges to secure product prices for a substantial portion of our expected production.

• Benefit from the Transactional Nature of Our Industry. The independent exploration and production industry has been consolidating for a number of years. Our business strategy embraces this trend. We intend to assemble a portfolio of quality proved reserves and drilling opportunities within a core group of operated properties that may potentially be desirable as a strategic acquisition target by larger industry participants.

Oil and Gas Reserves

The December 31, 2005 proved reserve estimates presented in this document were prepared by Netherland, Sewell and Associates, Inc. (Netherland, Sewell). For additional information regarding estimates of proved reserves, the preparation of such estimates by Netherland, Sewell and other information about our oil and gas reserves, see Item 8. Consolidated Financial Statements and Supplementary Data, Supplemental Oil and Gas Information. Our reserves are sensitive to commodity prices and their effect on economic producing rates. Our estimated proved reserves are based on oil and gas spot market prices in effect on the last trading day of December 2005.

There are a number of uncertainties inherent in estimating quantities of proved reserves, including many factors beyond our control, such as commodity pricing. Therefore, the reserve information in this Form 10-K represents only estimates. Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers may vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revising the original estimate. Accordingly, initial reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. The meaningfulness of such estimates depends primarily on the accuracy of the assumptions upon which they were based. Except to the extent we acquire additional properties containing proved reserves or conduct successful exploration and development activities or both, our proved reserves will decline as reserves are produced.

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The following table presents certain information as of December 31, 2005 and excludes information relating to the reserves and properties acquired in the North Louisiana Acquisitions. Shut-in wells currently not capable of production are excluded from the producing well information.

							East Texas
	Anadarko		South		Permian		and North		Arkoma		Gulf				Gulf of
	Basin		Texas		Basin		Louisiana		Basin		Coast		Other		Mexico (2)		Total
Proved Reserves at Year End (Bcfe)
Developed		47.4		41.3		127.9		11.7		13.9		47.8		7.5		14.5		312.0
Undeveloped		8.8		26.9		48.5		6.2		3.7		20.0		0.5		10.7		125.3
Total		56.2		68.2		176.4		17.9		17.6		67.8		8.0		25.2		437.3
Gross Wells		941		317		1,745		607		470		364		209		223		4,876
Net Wells (1)		143.1		80.9		331.7		54.4		79.3		118.8		21.6		26.9		856.7

(1)	The term net as used in net production throughout this document refers to amounts that include only acreage or production that is owned by the Company and produced to its interest, less royalties and production due to others. Net Wells represents our working interest share of each well.
(2)	The Gulf of Mexico properties are expected to be sold by March 31, 2006.

Anadarko

The West Edmond Hunton Lime Unit, or WEHLU, is our largest property in this region, covering 30,000 acres (approximately 47 square miles) primarily in Oklahoma County, Oklahoma. The WEHLU field, originally discovered in 1942, is the largest Hunton Lime formation field in the state of Oklahoma. The field has 38 oil and natural gas wells (36 currently producing) with stable production holding the entire unit. We own a 98% working interest and 80% net revenue interest in the majority of the field. Additionally, we have an agreement with a private company to jointly develop additional reserves and production in a portion of WEHLU. The area of mutual interest created by the agreement covers 5,680 acres located in the central northwest portion of the field and we own a 40% working interest and 33% net revenue interest in this area. Two successful horizontal wells were drilled in 2005 and we expect to drill as many as six additional horizontal wells in WEHLU in 2006.

In the Lipscomb field in Lipscomb County, Texas the Tyson ‘‘A’’ #4H (50% working interest and 37% net revenue interest) has been recently completed as a horizontal well in the Cleveland sand and had initial production in excess of 3 Mmcfe/d. We expect to drill six additional wells in this field during 2006.

South Texas

Our properties in South Texas produce primarily from the Vicksburg, Wilcox and Frio formations, which range in depth from approximately 5,500 to 15,000 feet. We believe that the South Texas region will continue to be a key area for us for potential growth via our drilling program. Also, we are expanding our exploration activities in South Texas through joint ventures with other experienced operators covering up to 800 square miles. This program involves the merging and reprocessing of multiple 3-D seismic data sets and is designed to identify, evaluate and drill deeper objectives within the Wilcox, Vicksburg and Frio trends in this core exploration area. We estimate that we will own and be the operator of approximately 50% of the working interest associated with this program.

In the Lions field, located in Goliad County, we put three new high rate wells on production during the fourth quarter of 2005. These wells, the Petrohawk Weise #2 (50% working interest and 38% net revenue interest), Wright Materials #3 ST2 (28% working interest and 20% net revenue interest) and Weise GU ‘‘A’’ #1 (32% working interest and 24% net revenue interest), were all completed from multiple Lower Wilcox sands and had combined early production rates of 41 Mmcfe/d gross and 13 Mmcfe/d net. Production is currently constrained due to limitations imposed by treatment facilities in the field. These facilities are in the process of being upgraded and should allow for a significant increase in production from the field. Two to four additional wells are planned during 2006 in the Lions field, with continued development beyond 2006. Additionally, we are in the process of acquiring a high density 3-D seismic survey to better image the complexities of the field.

Gross reserve potential for the field is estimated to be in the range of 50-100 Bcfe. The La Reforma field, located in Starr and Hidalgo Counties, is a significant Vicksburg formation field, and we own between 25% and 50% working interest in this area. We are continuing our successful drilling program in the Lower Vicksburg formation in this field.

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The Guerra ‘‘D’’ #2 (50% working interest and 38% net revenue interest) was recently completed from multiple Vicksburg sands, which resulted in early production rates in excess of 9 Mmcfe/d. We and our partners intend to maintain an aggressive drilling program in this field through 2006, partially supported by the acquisition of significant additional acreage within our area of mutual interest by virtue of a recently announced farm-in. Additionally, we have merged and reprocessed over 100 square miles of 3-D seismic data within this field area and are actively pursuing the acquisition of additional leases. The Vicksburg formation in this area is complexly faulted and 3-D seismic data is extensively utilized to identify optimal structural targets. Wells in this field typically produce at initial rates of over 10 Mmcfe/d. Other Vicksburg/Frio fields in which we own a meaningful interest include Los Indios, Nabors, Ann Mag and McAllen Ranch.

We are in the process of completing our first well in the Provident City field in Colorado County. The Petrohawk Garrett #1 (55% working interest and 43% net revenue interest) encountered multiple Lower Wilcox sands between 13,300 and 15,700 feet. We have perforated and fracture stimulated three intervals in the well, and it was recently placed on production. Additionally, we are currently merging and reprocessing 3-D seismic data covering 200 square miles with the anticipation of further enhancing the area’s exploration potential, as well as actively acquiring leases covering additional prospective areas in this complex Lower Wilcox trend. We intend to drill at least two additional wells in this area in 2006.

In Matagorda County, we recently reached total depth on the Petrohawk Doss #1 (50% working interest and 40% net revenue interest) and anticipate first production from this well during the first quarter of 2006. This well is located within a large amplitude anomaly in the Lower Frio formation, which we believe has potential for a significant discovery. We are in the process of merging and reprocessing 3-D seismic data covering in excess of 300 square miles, as well as actively acquiring leases covering other prospective areas within this trend. Two additional wells are budgeted for 2006.

The Heard Ranch field, located in Bee County, was acquired in the Proton transaction and produces from the Frio formation at depths from 3,000 to 4,500 feet. We own between a 77% and an 89% working interest with between 56% and 65% net revenue interest at Heard Ranch and plan to drill up to four proved undeveloped and two probable locations in 2006. In the San Miguel Creek field in McMullen County, we anticipate drilling six Wilcox formation wells in 2006.

Permian Basin

In the Permian Basin, our principal properties are in the Waddell Ranch field in Crane County, Texas, the TXL field located in Ector County, Texas and the Jalmat field in Lea County, New Mexico. Since the acquisition of our Permian Basin assets, we have extensively examined and evaluated these properties. Our objective is to determine if unevaluated proved reserves and additional upside opportunities exist within these long-lived, multi-pay fields.

Waddell Ranch is our largest field in West Texas and produces primarily from the Queen, Grayburg, San Andres, Clear Fork, and Ellenburger formations at depths from 3,000 to 15,000 feet. The Waddell Ranch field complex is comprised of over 75,000 acres and is productive from over 15 different reservoirs. The development opportunities in this field continue to evolve through technical evaluation. Our staff has implemented a rigorous engineering and geological study over the past nine months. The results of this field study are the identification of over 1,000 additional potential drilling locations. This project has resulted in the addition of proved reserves at year end 2005, with the potential of continued reserve additions in future years. After review of this study with our working interest partners, we concluded that the 2006 capital budget would be increased to include the drilling of 30 new wells and 90 recompletions.

The TXL field located in Ector County, Texas is a unitized field in the Clearfork Tubb formation at approximately 5,600 feet. As a result of our ongoing evaluation, over 100 additional drill sites have been evaluated which we believe will lead to additional proved reserves as well as upside potential. As many as 20 wells are planned to be drilled in 2006 in this field.

The Jalmat field in Lea County, New Mexico is slated for an aggressive development drilling program in the Seven Rivers formation which contains over 55 proved developed locations and over 90 probable locations. We plan activity for at least 26 locations during 2006 (10 new wells and 16 recompletions) and may accelerate this program if additional drilling rigs can be secured. Our extensive evaluation of this area has resulted in the identification of significant waterflood potential in the Queen sand, a reservoir that has had excellent waterflood results from numerous offsetting units. We own a 96% working interest and 83% net revenue interest in this field.

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North Louisiana and East Texas

The properties acquired in the North Louisiana Acquisitions in January 2006 are located in the Elm Grove and Caspiana fields in North Louisiana. Current production is approximately 16 Mmcfe/d from the Cotton Valley and Hosston formations. We have identified 250 drilling locations on the 27,400 acre block and plan on a multi-year development program. In 2006, we have budgeted $35 million for development drilling on these properties.

Our properties in the East Texas basin produce primarily from the Cotton Valley and Travis Peak/Hosston formations, which range in depth from approximately 6,500 to 10,000 feet. We own significant interests in the South Carthage, North Beckville and Blocker fields in Panola and Harrison Counties, Texas. Our working interest in these fields is between 47% and 100%. The producing formations of this area tend to contain multiple producing horizons and are typically low permeability sands that require fracture stimulation to achieve optimal producing rates. This type of fracture stimulation usually results in relatively high initial production rates that decline rapidly during the first year of production and subsequently stabilize at fairly low, more easily predictable annual decline rates. Much of our production in this area is from wells that have been producing for several years and are in the latter, more stable stage of production, resulting in a relatively long reserves-to-production ratio.

We have been actively acquiring acreage in the developing James Lime horizontal play and in the Travis Peak vertical play in Nacogdoches, Shelby and Angelina Counties, Texas. We have acquired over 14,000 net acres to date, and we anticipate adding significant acreage to our position through additional leasing and farm-out negotiations. The initial well was spud during February 2006 and is currently being completed. We plan on maintaining a one-rig program in this area throughout 2006 with the intent to add a second rig pending drilling success and rig availability.

Arkoma

In the Arkoma region, our properties produce primarily from the Atoka formation at depths of 2,500 to 6,000 feet. We own significant interests in the Hichita, Pine Hollow, Kinta and Cedars fields in Pittsburg, Haskell and McIntosh Counties, Oklahoma. Our working interest in these fields is between 23% and 100%.

We believe that the Pine Hollow field in Pittsburg County, Oklahoma has multiple drilling opportunities. We intend on participating with a 25% working interest in up to 25 horizontal wells in the Hartshorne Coal Bed Methane play in 2006. Additionally, we anticipate the operator will continue its development of the horizontal Woodford Shale play in which we have working interest ranging from 5% to 20%.

In the Hichita field in McIntosh County, Oklahoma we own an approximate 75% working interest in over 15,000 gross acres that are within the Caney Shale play. We intend on testing the Caney Shale with a horizontal well during 2006. In addition to the Caney Shale, we believe the Hartshorne Coal is prospective for horizontal development in this area and we are currently evaluating its potential.

We plan to spud the initial two exploratory wells on the 120,000 gross acre block we control in the eastern area of the Arkoma Basin during the second quarter of 2006. Both wells on our Flower Prospect (76% working interest, 60% net revenue interest) are planned to examine numerous potential objectives. The first well’s primary objective is the Jackfork formation at approximately 12,700 feet. The second well is expected to target typical Arkoma Basin Atokan objectives at depths between 7,000 and 10,000 feet.

Gulf Coast

The Gueydan field in Vermilion Parish, Louisiana is our most significant field in the Gulf Coast region and was acquired as part of the acquisition of Proton. Production in this field is from 2,500 to 10,000 feet in depth. Our working interest ranges from 50% to 100%, and we plan to drill 10 wells in 2006 in the Gueydan field. We enjoyed significant success during 2005 with our drilling program in this field. In addition to the development of the 2,700 foot sands with the Alliance #45, #50 and #51 (100% working interest, 78% net revenue interest), drilling has continued in deeper Alliance Sand wells at approximately 9,500 feet. Most recently, the Noble #1 (50% working interest and 39% net revenue interest) has been completed and is producing at a gross rate of 3 Mmcfe/d. In addition, the Alliance #47 (98% working interest and 81% net revenue interest) was logged and confirmed 45 feet of high quality pay sand. We have also leased approximately 2,000 additional acres within the area, and are in the process of conducting a new 3-D seismic survey to confirm additional prospects. In 2006, six shallow exploratory wells, three 9,500 foot Alliance Sand developmental wells, and one 16,000 foot deep Frio exploratory well are budgeted. Other significant fields in this region include South Bayou Boeuf in LaFourche Parish, Louisiana, Reddell in Evangeline Parish, Louisiana and North Leroy in Vermilion Parish, Louisiana.

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Gulf of Mexico

At December 31, 2005 we owned interests in 28 blocks in the federal waters of the Gulf of Mexico. Our largest fields in this region are High Island A-553, Ship Shoal 208/239, South Marsh Island 142, High Island A-334 and Ship Shoal 246. The majority of our interests in the Gulf of Mexico are non-operated. Net production from our Gulf of Mexico properties was approximately 15 Mmcfe/d in September 2005 when Hurricane Rita required all of these properties to be shut-in. Since October 2005, the majority of our Gulf of Mexico properties have returned to production with the remainder expected to be back on line by the end of March 2006, subject to third party pipelines and onshore processing plants being returned to full operating status. We believe we did not sustain any significant damage to any of our offshore properties during either Hurricane Katrina or Hurricane Rita.

In West Cameron Block 39, drilling operations resumed in early January, after hurricane-related delays, on the 21,000-foot MD Lower Miocene test operated by Norsk-Hydro. We own a 10% working interest (8.5% net revenue interest) in the well and anticipate reaching total depth prior to the end of the second quarter of 2006. This interest is not included in the package of properties in the Gulf of Mexico.

On February 3, 2006, we entered into a definitive agreement with Northstar GOM, LLC to sell substantially all of our Gulf of Mexico properties for $52.5 million in cash. These properties have estimated proved reserves as of December 31, 2005 of approximately 25 Bcfe, are approximately 70% gas, 59% proved developed and 27% operated. Current production is estimated to be approximately 10 Mmcfe/d. The transaction is expected to close by March 31, 2006.

Risk Management

We use hedges to reduce price volatility, help ensure that we have adequate cash flow to fund our capital programs and manage price risks and returns on some of our acquisitions and drilling programs. Our decision on the quantity and price at which we choose to hedge our production is based in part on our view of current and future market conditions. While there are many different types of derivatives available, we primarily use oil and gas price collar and swap agreements to attempt to manage price risk more effectively. The collar agreements are put and call options used to establish floor and ceiling commodity prices for a fixed volume of production during a certain time period. The price swaps call for payments to, or receipts from, counterparties based on whether the market price of oil and gas for the period is greater or less than the fixed price established for that period when the swap is put in place. They provide for payments to counterparties if the index price exceeds the ceiling and payments from the counterparties if the index price is below the floor. We only enter into derivatives arrangements with credit worthy counterparties. These arrangements expose us to the risk of financial loss if our counterparty is unable to satisfy its obligations. We will continue to evaluate the benefit of employing derivatives in the future. See Item 7A Quantitative and Qualitative Disclosures about Market Risk for additional information.

Oil and Gas Operations

Our principal properties consist of developed and undeveloped oil and gas leases and the reserves associated with these leases. Generally, developed oil and gas leases remain in force so long as production is maintained. Undeveloped oil and gas leaseholds are generally for a primary term of three to five years. In most cases, the term of our undeveloped leases can be extended by paying delay rentals or by producing reserves that are discovered under those leases.

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The table below sets forth the results of our drilling activities for the periods indicated:

	Years Ended December 31,
	2005				2004				2003
	Gross		Net		Gross		Net		Gross		Net
Exploratory Wells:
Productive (1)		8		2.40		2		0.57		2		0.39
Dry		5		1.29		5		0.42		1		0.35
Total Exploratory		13		3.69		7		0.99		3		0.74
Development Wells:
Productive (1)		129		27.40		61		10.79		18		4.34
Dry		4		1.35		3		0.15		7		1.94
Total Development		133		28.75		64		10.94		25		6.28
Total Wells:
Productive (1)		137		29.80		63		11.36		20		4.73
Dry		9		2.64		8		0.57		8		2.29
Total		146		32.44		71		11.93		28		7.02

(1) Although a well may be classified as productive upon completion, future production may deem the well to be uneconomical, particularly exploratory wells where there is no production history.

We own interest in developed and undeveloped oil and gas acreage in the locations set forth in the table below. These ownership interests generally take the form of working interests in oil and gas leases or licenses that have varying terms. The following table presents a summary of our acreage interests as of December 31, 2005:

	Developed Acreage				Undeveloped Acreage				Total Acreage
State	Gross		Net		Gross		Net		Gross		Net
Alabama		1,920		174		—		—		1,920		174
Arkansas		16,978		3,712		110,610		68,591		127,588		72,303
Kansas		16,540		5,512		8,865		3,519		25,405		9,031
Louisiana		63,797		9,720		5,601		2,431		69,398		12,151
Mississippi		7,120		745		—		—		7,120		745
New Mexico		30,440		11,866		—		—		30,440		11,866
North Dakota		9,680		795		—		—		9,680		795
Oklahoma		256,386		77,035		1,156		569		257,542		77,604
Oregon		2,400		1,187		—		—		2,400		1,187
South Dakota		1,920		320		—		—		1,920		320
Texas		419,056		104,390		23,651		13,694		442,707		118,084
Utah		14,720		1,506		—		—		14,720		1,506
Wyoming		15,561		1,206		—		—		15,561		1,206
Offshore		218,720		36,594		845		185		219,565		36,779
Total Acreage		1,075,238		254,762		150,728		88,989		1,225,966		343,751

At December 31, 2005, we had estimated proved reserves of approximately 262 Bcf of natural gas and 29.2 MMBbls of oil located onshore in the United States and offshore in the Gulf of Mexico. The following table sets forth, at December 31, 2005, these reserves:

	Proved		Proved		Total
	Developed		Undeveloped		Proved
Gas (Bcf)		177.6		84.3		261.9
Oil (MMBbls)		22.4		6.8		29.2

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The estimates of quantities of proved reserves above were made in accordance with the definitions contained in SEC Regulation S-X, Rule 4-10(a).

For additional information on our oil and gas reserves, see Item 8. Consolidated Financial Statements and Supplementary Data, Supplementary Oil and Gas Information.

We account for our oil and gas producing activities using the full cost method of accounting as prescribed by the SEC. Accordingly, all costs incurred in the acquisition, exploration, and development of proved oil and gas properties, including the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized. All general corporate costs are expensed as incurred. Sales or other dispositions of oil and gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded unless the ratio of cost to proved reserves would significantly change. Depletion of evaluated oil and gas properties is computed on the units of production method based on proved reserves. The net capitalized costs of evaluated oil and gas properties are subject to a full cost ceiling test.

Capitalized costs of our evaluated and unevaluated properties at December 31, 2005, 2004 and 2003 are summarized as follows:

	December 31,
	2005			2004			2003
	(in thousands)
Capitalized costs:
Evaluated properties	$	1,096,810		$	484,233		$	78,717
Unevaluated properties		162,133			48,840			1,294
		1,258,943			533,073			80,011
Less accumulated depreciation and depletion		(121,456	)		(48,740	)		(39,740	)
	$	1,137,487		$	484,333		$	40,271

Our oil and gas production volumes and average sales price are as follows:

	Years Ended December 31,
	2005		2004		2003
Gas production (MMcf)		20,219		3,569		1,859
Oil production (MBbl)		1,555		244		129
Equivalent production (MMcfe)		29,549		5,030		2,632
Average price per unit:
Gas (per Mcf)	$	8.46	$	6.53	$	4.71
Oil (per Bbl)		55.62		40.71		27.36
Equivalent (per Mcfe)		8.73		6.61		4.78

The 2005 and 2004 average oil and gas sales prices above do not reflect the impact of cash paid on settled contracts as these amounts are reflected as other income and expenses in the consolidated statement of operations, consistent with our decision not to elect hedge accounting. Including the realized impact of derivatives, 2005 and 2004 gas prices were $7.32 and $6.41 per Mcf and our realized oil prices were $47.20 and $37.76 per Bbl, respectively. In 2003, we designated our derivatives as cash flow hedges and applied hedge accounting. Consistent with this decision, the average oil and gas prices for 2003 above already reflect the impact of cash paid on settled contracts. The 2003 average natural gas price above was reduced by $0.59 per Mcf and the average crude oil price above was reduced by $1.80 per Bbl.

Competitive Conditions in the Business

The oil and gas industry is highly competitive and we compete with a substantial number of other companies that have greater resources. Many of these companies explore for, produce and market oil and gas, as well as, carry on refining operations and market the resultant products on a worldwide basis. The primary areas in which we encounter substantial competition are in locating and acquiring desirable leasehold acreage for our drilling and development operations, locating and acquiring attractive producing oil and gas properties, locating and obtaining sufficient rig

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and platform availability, and obtaining purchasers and transporters of the oil and gas we produce. There is also competition between oil and gas producers and other industries producing energy and fuel. Furthermore, competitive conditions may be substantially affected by various forms of energy legislation and/or regulation considered from time to time by the government of the United States; however, it is not possible to predict the nature of any such legislation or regulation which may ultimately be adopted or its effects upon our future operations. Such laws and regulations may, however, substantially increase the costs of exploring for, developing or producing oil and gas and may prevent or delay the commencement or continuation of a given operation. The exact effect of these risk factors cannot be accurately predicted.

Other Business Matters

Markets and Major Customers

In 2005, we had one individual purchaser that accounted for approximately 12% of our total sales. In 2004, we had no individual customers accounting for more than 10% of our total sales. In 2003, approximately 53% of our total sales were made to three individual customers. We do not believe the loss of any one of our purchasers would materially affect our ability to sell the oil and gas we produce. We believe other purchasers are available in our areas of operations.

Seasonality of Business

Weather conditions affect the demand for, and prices of, natural gas and can also delay drilling activities, disrupting our overall business plans. Demand for natural gas is typically higher in the fourth and first quarters resulting in higher natural gas prices. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of results, which may be realized on an annual basis.

Operational Risks

Oil and gas exploration and development involves a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. There is no assurance that we will discover or acquire additional oil and gas in commercial quantities. Oil and gas operations also involve the risk that well fires, blowouts, equipment failure, human error and other circumstances that may cause accidental leakage of toxic or hazardous materials, such as petroleum liquids or drilling fluids into the environment, or cause significant injury to persons or property may occur. In such event, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could substantially reduce available cash and possibly result in loss of oil and gas properties. Such hazards may also cause damage to or destruction of wells, producing formations, production facilities and pipeline or other processing facilities. We are not aware of any of these instances that have occurred to date that need to be accrued for.

As is common in the oil and gas industry, we will not insure fully against all risks associated with our business either because such insurance is not available or because premium costs are considered prohibitive. A loss not fully covered by insurance could have a materially adverse effect on our financial position and results of operations. For further discussion on risks see Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Regulations

Domestic exploration for, and production and sale of, oil and gas are extensively regulated at both the federal and state levels. Legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue, and have issued, rules and regulations binding on the oil and gas industry that often are costly to comply with and that carry substantial penalties for failure to comply. In addition, production operations are affected by changing tax and other laws relating to the petroleum industry, constantly changing administrative regulations and possible interruptions or termination by government authorities.

State regulatory authorities have established rules and regulations requiring permits for drilling operations, drilling bonds and reports concerning operations. Most states in which we operate also have statutes and regulations governing a number of environmental and conservation matters, including the unitization or pooling of oil and gas properties and establishment of maximum rates of production from oil and gas wells. Many states also restrict production to the market demand for oil and gas. Such statutes and regulations may limit the rate at which oil and gas could otherwise be produced from our properties.

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We are subject to extensive and evolving environmental laws and regulations. These regulations are administered by the United States Environmental Protection Agency and various other federal, state, and local environmental, zoning, health and safety agencies, many of which periodically examine our operations to monitor compliance with such laws and regulations. These regulations govern the release of waste materials into the environment, or otherwise relating to the protection of the environment, human, animal and plant health, and affect our operations and costs. In recent years, environmental regulations have taken a cradle to grave approach to waste management, regulating and creating liabilities for the waste at its inception to final disposition. Our oil and gas exploration, development and production operations are subject to numerous environmental programs, some of which include solid and hazardous waste management, water protection, air emission controls and situs controls affecting wetlands, coastal operations and antiquities.

Environmental programs typically regulate the permitting, construction and operations of a facility. Many factors, including public perception, can materially impact the ability to secure an environmental construction or operation permit. Once operational, enforcement measures can include significant civil penalties for regulatory violations regardless of intent. Under appropriate circumstances, an administrative agency can request a cease and desist order to terminate operations.

New programs and changes in existing programs are anticipated, some of which include natural occurring radioactive materials, oil and gas exploration and production waste management and underground injection of waste materials.

Each state in which we operate has laws and regulations governing solid waste disposal, water and air pollution. Many states also have regulations governing oil and gas exploration, development and production operations.

We are also subject to federal and state Hazard Communications and Community Right to Know statutes and regulations. These regulations govern record keeping and reporting of the use and release of hazardous substances. We believe we are in compliance with these requirements in all material respects.

We may be required in the future to make substantial outlays to comply with environmental laws and regulations. The additional changes in operating procedures and expenditures required to comply with future laws dealing with the protection of the environment cannot be predicted.

Employees

As of December 31, 2005, we had 154 full-time employees. We hire independent contractors on an as needed basis. We have no collective bargaining agreements with our employees. We believe that our employee relationships are satisfactory.

Access to Company Reports

We file periodic reports, proxy statements and other information with the SEC in accordance with the requirements of the Exchange Act of 1934, as amended, or the Exchange Act. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to such reports available free of charge through our corporate website at www.petrohawk.com as soon as reasonably practicable after we file any such report with the SEC. You may also read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains our reports, proxy and information statements, and our other filings which are also available to the public over the Internet at the SEC’s website at www.sec.gov. In addition, information related to the following items, among other information, can be found on our website: (1) our press releases, (2) our corporate governance guidelines, (3) our code of conduct, (4) our audit committee charter, (5) our compensation committee charter, and (6) our nominating committee charter.

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ITEM 1A. RISK FACTORS

Oil and natural gas prices are volatile, and low prices could have a material adverse impact on our business.

Our revenues, profitability and future growth and the carrying value of our properties depend substantially on prevailing oil and gas prices. Prices also affect the amount of cash flow available for capital expenditures and our ability to borrow and raise additional capital. The amount we will be able to borrow under our senior revolving credit facility will be subject to periodic redetermination based in part on changing expectations of future prices. Lower prices may also reduce the amount of oil and gas that we can economically produce and have an adverse effect on the value of our properties. Prices for oil and gas have increased significantly and been more volatile over the past twelve months. Historically, the markets for oil and gas have been volatile, and they are likely to continue to be volatile in the future. Among the factors that can cause volatility are:

• the domestic and foreign supply of oil and gas;

• the ability of members of the Organization of Petroleum Exporting Countries, or OPEC, and other producing countries to agree upon and maintain oil prices and production levels;

• political instability, armed conflict or terrorist attacks, whether or not in oil or gas producing regions;

• the level of consumer product demand;

• the growth of consumer product demand in emerging markets, such as China;

• labor unrest in oil and gas producing regions;

• weather conditions, including hurricanes;

• the price and availability of alternative fuels;

• the price of foreign imports;

• worldwide economic conditions; and

• the availability of liquid natural gas imports.

These external factors and the volatile nature of the energy markets make it difficult to estimate future prices of oil and gas.

In addition, the borrowing base limitation under our senior revolving credit facility is determined on a semi-annual basis at the discretion of our banks and is based, in part, on oil and gas prices. If the banks set our borrowing base at an amount below the aggregate principal amount of our debt outstanding under that facility, we could be required to repay a portion of our bank debt. We may not have sufficient funds to make such repayments, which could result in a default under the terms of the loan agreement and an acceleration of the loan.

Assets we acquire may prove to be worth less than we paid because of uncertainties in evaluating recoverable reserves and potential liabilities.

Our recent growth is due significantly to acquisitions of exploration and production companies, producing properties and undeveloped leaseholds. We expect acquisitions will also contribute to our future growth. Successful acquisitions require an assessment of a number of factors, including estimates of recoverable reserves, exploration potential, future oil and gas prices, operating and capital costs and potential environmental and other liabilities. Such assessments are inexact and their accuracy is inherently uncertain. In connection with our assessments, we perform a review of the acquired properties which we believe is generally consistent with industry practices. However, such a review will not reveal all existing or potential problems. In addition, our review may not permit us to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities. We do not inspect every well. Even when we inspect a well, we do not always discover structural, subsurface and environmental problems that may exist or arise. We are generally not entitled to contractual indemnification for preclosing liabilities, including environmental liabilities. Normally, we acquire interests in properties on an “as is” basis with limited remedies for breaches of representations and warranties.

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As a result of these factors, we may not be able to acquire oil and gas properties that contain economically recoverable reserves or be able to complete such acquisitions on acceptable terms.

Estimates of oil and gas reserves are uncertain and any material inaccuracies in these reserve estimates will materially affect the quantities and the value of our reserves.

This report on Form 10-K contains estimates of our proved oil and gas reserves. These estimates are based upon various assumptions, including assumptions required by the SEC relating to oil and gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The process of estimating oil and gas reserves is complex. This process requires significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir.

Actual future production, oil and gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and gas reserves will vary from those estimated. Any significant variance could materially affect the estimated quantities and the value of our reserves. Our properties may also be susceptible to hydrocarbon drainage from production by other operators on adjacent properties. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and gas prices and other factors, many of which are beyond our control.

Recovery of undeveloped reserves requires significant capital expenditures and successful drilling operations. The reserve data assumes that we will make significant capital expenditures to develop our reserves. Although we have prepared estimates of these oil and gas reserves and the costs associated with development of these reserves in accordance with SEC regulations, we cannot assure you that the estimated costs or estimated reserves are accurate, that development will occur as scheduled or that the actual results will be as estimated.

We intend to fund our development, acquisition and exploration activities in part through additional debt financing. A higher level of debt could negatively impact our financial condition, results of operations and business prospects.

As of December 31, 2005, we had approximately $500 million of long term debt, including $2.8 million of long term debt that is required to be repaid in the next 12 months. As of December 31, 2005, the borrowing base under our senior revolving credit facility was $260 million; however, as of January 31, 2006, it had increased to $400 million, due to the North Louisiana Acquisitions in early 2006. If we incur additional debt in order to fund our development, acquisition and exploration activities or for other purposes, our level of debt, and the covenants contained in the agreements governing our debt, could have important consequences, including the following:

• a portion of our cash flow from operations is used to pay interest on borrowings;

• the covenants contained in the agreements governing our debt limit, our ability to borrow additional funds, pay dividends, dispose of assets or issue shares of preferred stock and otherwise may affect our flexibility in planning for, and reacting to, changes in business conditions;

• a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes;

• a leveraged financial position would make us more vulnerable to economic downturns and could limit our ability to withstand competitive pressures; and

• any debt that we incur under our revolving credit facility will be at variable rates which make us vulnerable to increases in interest rates.

In addition, in connection with the Mission merger, we assumed Mission’s 9 7/8% senior notes in the aggregate principal amount of $130 million. The notes contain covenants that, subject to certain exceptions and qualifications, limit our ability and the ability of our subsidiaries to incur and guarantee additional indebtedness, issue certain types of equity securities, transfer or sell assets, or pay dividends. Additionally, transactions with affiliates, selling stock of a subsidiary, merging or consolidating are subject to qualifications.

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Our exploration and development drilling efforts and the operation of our wells may not be profitable or achieve our targeted returns.

We require significant amounts of undeveloped leasehold acreage in order to further our development efforts. Exploration, development, drilling and production activities are subject to many risks, including the risk that commercially productive reservoirs will not be discovered. We invest in property, including undeveloped leasehold acreage, which we believe will result in projects that will add value over time. However, we cannot guarantee that all of our prospects will result in viable projects or that we will not abandon our initial investments. Additionally, we cannot guarantee that the leasehold acreage we acquire will be profitably developed, that new wells drilled by us will be productive or that we will recover all or any portion of our investment in such leasehold acreage or wells. Drilling for oil and gas may involve unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient net reserves to return a profit after deducting operating and other costs. In addition, wells that are profitable may not achieve our targeted rate of return. Our ability to achieve our target results are dependent upon the current and future market prices for oil and gas, costs associated with producing oil and gas and our ability to add reserves at an acceptable cost. We rely to a significant extent on 3-D seismic data and other advanced technologies in identifying leasehold acreage prospects and in conducting our exploration activities. The 3-D seismic data and other technologies we use do not allow us to know conclusively prior to acquisition of leasehold acreage or drilling a well whether oil or gas is present or may be produced economically. The use of 3-D seismic data and other technologies also requires greater pre-drilling expenditures than traditional drilling strategies.

In addition, we may not be successful in implementing our business strategy of controlling and reducing our drilling and production costs in order to improve our overall return. The cost of drilling, completing and operating a well is often uncertain and cost factors can adversely affect the economics of a project. We cannot predict the cost of drilling, and we may be forced to limit, delay or cancel drilling operations as a result of a variety of factors, including:

• unexpected drilling conditions;

• pressure or irregularities in formations;

• equipment failures or accidents;

• adverse weather conditions, including hurricanes;

• compliance with governmental requirements; and

• shortages or delays in the availability of drilling rigs and the delivery of equipment.

Our ability to finance our business activities will require us to generate substantial cash flow.

Our business activities require substantial capital. We intend to finance our capital expenditures in the future through cash flow from operations, the incurrence of additional indebtedness and/or the issuance of additional equity securities. We cannot be sure that our business will continue to generate cash flow at or above current levels. Future cash flows and the availability of financing will be subject to a number of variables, such as:

• the level of production from existing wells;

• prices of oil and gas;

• our results in locating and producing new reserves;

• the success and timing of development of proved undeveloped reserves; and

• general economic, financial, competitive, legislative, regulatory and other factors beyond our control.

If we are unable to generate sufficient cash flow from operations to service our debt, we may have to obtain additional financing through the issuance of debt and/or equity. We cannot be sure that any additional financing will be available to us on acceptable terms. Issuing equity securities to satisfy our financing requirements could cause substantial dilution to our existing stockholders. The level of our debt financing could also materially affect our operations.

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If our revenues were to decrease due to lower oil and gas prices, decreased production or other reasons, and if we could not obtain capital through our senior revolving credit facility or otherwise, our ability to execute our development and acquisition plans, replace our reserves or maintain production levels could be greatly limited.

We depend substantially on the continued presence of key personnel for critical management decisions and industry contacts.

Our future performance will be substantially dependent on retaining key members of our management. The loss of the services of any of our executive officers or other key employees for any reason could have a material adverse effect on our business, operating results, financial condition and cash flows. We currently do not have employment agreements with any of our officers.

The unavailability or high cost of drilling rigs, equipment, supplies, personnel and oil field services could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget.

Our industry is cyclical and, from time to time, there is a shortage of drilling rigs, equipment, supplies or qualified personnel. During these periods, the costs and delivery times of rigs, equipment and supplies are substantially greater. In addition, the demand for, and wage rates of, qualified drilling rig crews rise as the number of active rigs in service increases. As a result of increasing levels of exploration and production in response to strong prices of oil and natural gas, the demand for oilfield services has risen, and the costs of these services are increasing, while the quality of these services may suffer. If the unavailability or high cost of drilling rigs, equipment, supplies or qualified personnel were particularly severe in Texas and Louisiana, we could be materially and adversely affected because our operations and properties are concentrated in those areas.

The marketability of our oil and gas production depends on services and facilities that we typically do not own or control. The failure or inaccessibility of any such services or facilities could result in a curtailment of production and revenues.

The marketability of our production depends in part upon the availability, proximity and capacity of gathering systems, pipelines and processing facilities. Pursuant to interruptible or short term transportation agreements, we generally deliver gas through gathering systems and pipelines that we do not own. Under the interruptible transportation agreements, the transportation of our gas may be interrupted due to capacity constraints on the applicable system, for maintenance or repair of the system, or for other reasons as dictated by the particular agreements. If any of the pipelines or other facilities become unavailable, we would be required to find a suitable alternative to transport and process the gas, which could increase our costs and reduce the revenues we might obtain from the sale of the gas. For example, Hurricane Rita disrupted the operations of gas pipelines and processing plants and required the evacuation of personnel required to oversee some of our facilities in the Gulf Coast and Gulf of Mexico areas.

We depend on the skill, ability and decisions of third party operators to a significant extent.

The success of the drilling, development and production of the oil and gas properties in which we have or expect to have a non-operating working interest is substantially dependent upon the decisions of such third-party operators and their diligence to comply with various laws, rules and regulations affecting such properties. The failure of any third-party operator to make decisions, perform their services, discharge their obligations, deal with regulatory agencies, and comply with laws, rules and regulations, including environmental laws and regulations in a proper manner with respect to properties in which we have an interest could result in material adverse consequences to our interest in such properties, including substantial penalties and compliance costs. Such adverse consequences could result in substantial liabilities to us or reduce the value of our properties, which could negatively affect our results of operations.

Our business is highly competitive.

The oil and gas industry is highly competitive in many respects, including identification of attractive oil and gas properties for acquisition, drilling and development, securing financing for such activities and obtaining the necessary equipment and personnel to conduct such operations and activities. In seeking suitable opportunities, we compete with a number of other companies, including large oil and gas companies and other independent operators with greater financial resources, larger numbers of personnel and facilities, and, in some cases, with more expertise. There can be no assurance that we will be able to compete effectively with these entities.

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Hedging transactions may limit our potential gains.

In order to manage our exposure to price risks in the marketing of our oil and gas production, from time to time we enter into oil and gas price hedging arrangements with respect to a portion of our expected production. While intended to reduce the effects of volatile oil and gas prices, such transactions may limit our potential gains and increase our potential losses if oil and gas prices were to rise substantially over the price established by the hedge. In addition, such transactions may expose us to the risk of loss in certain circumstances, including instances in which:

• our production is less than expected;

• there is a widening of price differentials between delivery points for our production and the delivery point assumed in the hedge arrangement; or

• the counterparties to our hedging agreements fail to perform under the contracts.

Our oil and gas activities are subject to various risks which are beyond our control.

Our operations are subject to many risks and hazards incident to exploring and drilling for, producing, transporting, marketing and selling oil and gas. Although we may take precautionary measures, many of these risks and hazards are beyond our control and unavoidable under the circumstances. Many of these risks or hazards could materially and adversely affect our revenues and expenses, the ability of certain of our wells to produce oil and gas in commercial quantities, the rate of production and the economics of the development of, and our investment in the prospects in which we have or will acquire an interest. Any of these risks and hazards could materially and adversely affect our financial condition, results of operations and cash flows. Such risks and hazards include:

• human error, accidents, labor force and other factors beyond our control that may cause personal injuries or death to persons and destruction or damage to equipment and facilities;

• blowouts, fires, hurricanes, pollution and equipment failures that may result in damage to or destruction of wells, producing formations, production facilities and equipment;

• unavailability of materials and equipment;

• engineering and construction delays;

• unanticipated transportation costs and delays;

• unfavorable weather conditions;

• hazards resulting from unusual or unexpected geological or environmental conditions;

• environmental regulations and requirements;

• accidental leakage of toxic or hazardous materials, such as petroleum liquids or drilling fluids, into the environment;

• changes in laws and regulations, including laws and regulations applicable to oil and gas activities or markets for the oil and gas produced;

• fluctuations in supply and demand for oil and gas causing variations of the prices we receive for our oil and gas production; and

• the internal and political decisions of OPEC and oil and natural gas producing nations and their impact upon oil and gas prices.

As a result of these risks, expenditures, quantities and rates of production, revenues and cash operating costs may be materially adversely affected and may differ materially from those anticipated by us.

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Governmental and environmental regulations could adversely affect our business.

Our business is subject to federal, state and local laws and regulations on taxation, the exploration for and development, production and marketing of oil and gas and safety matters. Many laws and regulations require drilling permits and govern the spacing of wells, rates of production, prevention of waste, unitization and pooling of properties and other matters. These laws and regulations have increased the costs of planning, designing, drilling, installing, operating and abandoning our oil and gas wells and other facilities. In addition, these laws and regulations, and any others that are passed by the jurisdictions where we have production, could limit the total number of wells drilled or the allowable production from successful wells, which could limit our revenues.

Our operations are also subject to complex environmental laws and regulations adopted by the various jurisdictions in which we have or expect to have oil and gas operations. We could incur liability to governments or third parties for any unlawful discharge of oil, gas or other pollutants into the air, soil or water, including responsibility for remedial costs.

We could potentially discharge these materials into the environment in any of the following ways:

• from a well or drilling equipment at a drill site;

• from gathering systems, pipelines, transportation facilities and storage tanks;

• damage to oil and gas wells resulting from accidents during normal operations; and

• blowouts, hurricanes, cratering and explosions.

Because the requirements imposed by laws and regulations are frequently changed, we cannot assure you that laws and regulations enacted in the future, including changes to existing laws and regulations, will not adversely affect our business. In addition, because we acquire interests in properties that have been operated in the past by others, we may be liable for environmental damage caused by the former operators.

We cannot be certain that the insurance coverage maintained by us will be adequate to cover all losses that may be sustained in connection with all oil and gas activities.

We maintain general and excess liability policies, which we consider to be reasonable and consistent with industry standards. These policies generally cover:

• personal injury;

• bodily injury;

• third party property damage;

• medical expenses;

• legal defense costs;

• pollution in some cases;

• well blowouts in some cases; and

• workers compensation.

There can be no assurance that this insurance coverage will be sufficient to cover every claim made against us in the future. A loss in connection with our oil and natural gas properties could have a materially adverse effect on our financial position and results of operation to the extent that the insurance coverage provided under our policies cover only a portion of any such loss.

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Title to the properties in which we have an interest may be impaired by title defects.

We generally obtain title opinions on significant properties that we drill or acquire. However, there is no assurance that we will not suffer a monetary loss from title defects or failure. Generally, under the terms of the operating agreements affecting our properties, any monetary loss is to be borne by all parties to any such agreement in proportion to their interests in such property. If there are any title defects or defects in assignment of leasehold rights in properties in which we hold an interest, we will suffer a financial loss.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

A description of our properties is included in Item 1. Business and is incorporated herein by reference.

We believe that we have satisfactory title to the properties owned and used in our business, subject to liens for taxes not yet payable, liens incident to minor encumbrances, liens for credit arrangements and easements and restrictions that do not materially detract from the value of these properties, our interests in these properties, or the use of these properties in our business. We believe that our properties are adequate and suitable for us to conduct business in the future.

ITEM 3. LEGAL PROCEEDINGS

From time to time we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. All known liabilities are accrued based on management’s best estimate of the potential loss. While the outcome and impact of such legal proceedings cannot be predicted with certainty, our management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on our consolidated financial position, results of operations or cash flow.

Andrew A. Roth, as a nominal plaintiff, filed a lawsuit against us, certain of our directors and certain of our current and former stockholders, including PHAWK, LLC, alleging violations of Section 16(b) of the Exchange Act of 1934, as amended. The lawsuit seeks recovery, on our behalf, of alleged short-swing profits of at least $6,465,000. Mr. Roth filed the lawsuit in the United States District Court for the Southern District of New York on October 31, 2005 as Andrew A. Roth derivatively on behalf of Petrohawk Energy Corporation v. PHAWK, LLC, et. al., and the case was assigned Civil Case Number: 05 CV 9247. Pursuant to an August 1, 2005 demand letter from Mr. Roth, an independent committee of the board of directors investigated Mr. Roth’s claims prior to the filing of the lawsuit and concluded they had no merit. We are monitoring developments in the matter with legal counsel. We do not believe this litigation shall have a material effect on our financial position or results of operations, should the plaintiff’s allegations be found to be accurate.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our shareholders during the fourth quarter of the fiscal year ended December 31, 2005.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock began trading July 16, 2004 on the Nasdaq National Market under the symbol HAWK. Prior to July 16, 2004, our common stock traded on the Nasdaq National Market under the symbol BETA. The following table sets forth the high and low intra-day sales prices per share of our common stock as reported on the Nasdaq National Market. The high and low amounts for periods prior to May 26, 2004 have been adjusted to reflect the one-for-two reverse split of our common stock effective on that date.

	High		Low
2005
First Quarter	$	10.98	$	7.45
Second Quarter		11.94		7.57
Third Quarter		14.91		10.45
Fourth Quarter		15.17		11.02
2004
First Quarter	$	7.84	$	3.70
Second Quarter		9.57		5.50
Third Quarter		8.80		6.40
Fourth Quarter		9.89		7.85

We have never paid cash dividends on our common stock. We intend to retain earnings for use in the operation and expansion of our business and therefore do not anticipate declaring cash dividends on our common stock in the foreseeable future. Holders of our 8% cumulative convertible preferred stock are entitled to receive cumulative dividends at the annual rate of $0.74 per share. No dividends may be paid on common stock unless all cumulative dividends due on 8% cumulative convertible preferred stock have been declared and paid. Any future determination to pay dividends on common stock will be at the discretion of the board of directors and will be dependent upon then existing conditions, including our prospects, and such other factors, as the board of directors deems relevant. We are also restricted from paying cash dividends on common stock under our revolving credit facility.

Approximately 268 shareholders of record as of December 31, 2005 held our common stock. In many instances, a registered shareholder is a broker or other entity holding shares in street name for one or more customers who beneficially own the shares.

A description of our equity compensation plan information is incorporated by reference from our definitive proxy statement to be filed with respect to our 2006 annual meeting under the heading Executive Compensation.

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

We did not purchase any of our equity securities during the fourth quarter of 2005. In addition, we did not sell any of our equity securities which were not registered under the Securities Act of 1933, as amended, during the fourth quarter of 2005. At December 31, 2005, we held 8,382 shares of common stock as treasury shares.

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ITEM 6. SELECTED HISTORICAL FINANCIAL DATA

The following table presents selected historical financial data derived from our consolidated financial statements. The following data is only a summary and should be read with our historical consolidated financial statements and related notes contained in this document. The acquisition of Mission in 2005 and of Wynn-Crosby in 2004 affects the comparability between the consolidated financial data for the periods presented.

	Year ended December 31,
	2005			2004		2003		2002			2001
	(in thousands, except per share data)
Income Statement Data:
Oil and gas sales	$	258,039		$	33,577	$	12,925	$	9,648		$	13,657
Income from operations		103,890			4,699		1,496		(6,347	)		(11,813	)
Net (loss) income		(16,634	)		8,117		968		(6,882	)		(9,046	)
Net (loss) income applicable to common shareholders		(17,074	)		7,672		521		(7,329	)		(9,278	)
Earnings (loss) per share:
Basic (1)	$	(0.31	)	$	0.71	$	0.08	$	(1.18	)	$	(1.50	)
Diluted (1)		(0.31	)		0.36		0.08		(1.18	)		(1.50	)
Balance sheet data:
Working (deficit) capital	$	(37,905	)	$	8,856	$	2,189	$	(77	)	$	(104	)
Total assets		1,410,174			534,199		46,115		44,753			52,629
Total long-term debt		495,801			239,500		13,285		13,635			13,649
Stockholders’ equity		526,458			247,091		29,270		28,048			35,874

⁽¹⁾ On May 18, 2004, our Board of Directors approved a one-for-two reverse stock split that was effective May 26, 2004. The reverse stock split was implemented to effect the conditional approval by the NASDAQ National Market of our listing application, which was later formally approved. As a result, all prior year common stock share amounts have been restated to reflect this reverse stock split in the chart above.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist in understanding our results of operations and our present financial condition. Our consolidated financial statements and the accompanying notes included elsewhere in this Form 10-K contain additional information that should be referred to when reviewing this material.

Statements in this discussion may be forward-looking. These forward-looking statements involve risks and uncertainties, including those discussed below, which could cause actual results to differ from those expressed.

Overview

We are a independent oil and gas company engaged in the acquisition, development, production and exploration of oil and gas properties located in North America. Our properties are concentrated in the Permian Basin, East Texas, North Louisiana, Gulf Coast, South Texas, Anadarko and Arkoma regions. We have increased our proved reserves and production principally through acquisitions in conjunction with an active drilling program. Since November 2004, we have acquired approximately 535 Bcfe of proved reserves for approximately $1.2 billion, including the recently completed North Louisiana Acquisitions. During 2005, excluding acquisitions, we replaced approximately 149% of our production organically. Organic reserve additions were primarily driven by 3D seismic supported exploratory drilling in our core regions of South Texas and the Gulf Coast, as well as continuing evaluation of several fields in the Permian Basin. Fields that contributed significantly to the growth were the Lions (Goliad County, Texas); Waddell Ranch (Crane County, Texas); Provident City (Colorado County, Texas); La Reforma (Starr County, Texas); and Gueydan (Vermilion Parish, Louisiana). During 2005, we participated in the drilling of 146 wells, of which nine were dry holes, for a success rate of 94%.

We focus on maintaining a balanced, geographically diverse portfolio of long-lived, lower risk reserves along with shorter lived, higher margin reserves. We believe that this balanced reserve mix provides a diversified cash flow foundation to fund our development and exploration drilling program.

Our financial results depend upon many factors, particularly the price of oil and gas and our ability to market our production. Commodity prices are affected by changes in market demands, which are impacted by overall economic activity, weather, pipeline capacity constraints, inventory storage levels, basis differentials and other factors. As a result, we cannot accurately predict future oil and gas prices, and therefore, we cannot determine what effect increases or decreases will have on our capital program, production volumes and future revenues. In addition to production volumes and commodity prices, finding and developing sufficient amounts of oil and gas reserves at economical costs are critical to our long-term success.

Capital Resources and Liquidity

Our primary sources of cash in 2005 were from operating and financing activities. Proceeds from the issuance of long term debt and cash received from operations as well as divestitures in 2005 were offset by cash used in investing activities to complete the acquisitions of Mission and Proton. Operating cash flow fluctuations were substantially driven by commodity prices and changes in our production volumes. Prices for oil and gas have historically been subject to seasonal influences characterized by peak demand and higher prices in the winter heating season; however, the impact of other risks and uncertainties have influenced prices throughout the recent years. Working capital was substantially influenced by these variables. Fluctuation in cash flow may result in an increase or decrease in our capital and exploration expenditures. See Results of Operations for a review of the impact of prices and volumes on sales. Cash flows provided by operating activities were primarily used to fund exploration and development expenditures. See below for additional discussion and analysis of cash flow.

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	Year Ended December 31,
	2005			2004			2003
				(in thousands)
Cash flows provided by operating activities	$	135,446		$	17,943		$	5,793
Cash flows used in investing activities		(206,109	)		(400,481	)		(3,546	)
Cash flows provided by (used in) financing activities		77,914			386,088			(1,064	)
Net increase in cash and cash equivalents	$	7,251		$	3,550		$	1,183

Operating Activities. Net cash provided by operating activities in 2005 increased $117.5 million from 2004. This increase was primarily due to higher commodity prices and an increase in sales volumes in conjunction with the 2005 acquisitions discussed above. Average realized prices increased $2.12 from $6.61 per Mcfe in 2004 to $8.73 per Mcfe in 2005. Production volumes increased 24,519 Mmcfe from 5,030 Mmcfe in 2004 to 29,549 Mmcfe in 2005. We expect 2006 production to increase, but we are unable to predict future commodity prices. As a result, we cannot provide any assurance about future levels of net cash provided by operating activities. Net cash provided by operating activities in 2004 increased $12.2 million from 2003. This increase was primarily due to a 38% increase in the average equivalent price per Mcfe.

Investing Activities. The primary driver of cash used in investing activities was capital spending, inclusive of acquisitions. We establish the budget for these amounts based on our estimate of future commodity prices. Due to the volatility of commodity prices, our budget may be periodically adjusted during any given year. Cash used in investing activities in 2005 decreased $194.4 million from $400.5 million in 2004 to $206.1 million in 2005 primarily due to the nature of financing of our Wynn-Crosby acquisition as compared to our Mission acquisition. In 2004, we spent $384.5 million to acquire Wynn-Crosby for a purchase price of approximately $425 million after closing adjustments. The transaction was funded with proceeds from a $200 million private equity placement, $210 million in borrowings from our commercial bank group and cash.

In 2005, we acquired Mission for consideration consisting of 60.1% of Company common stock and 39.9% cash. In this transaction we paid approximately $96.5 million, net of cash acquired. We also assumed $184 million of Mission’s long-term debt. Also in 2005, we acquired Proton for approximately $52.6 million, net of cash acquired. The 2005 acquisitions were offset by the receipt of $88.9 million in 2005, primarily for the sale of certain royalty properties for $80 million. The overall net decrease in cash used in investing activities was offset by an increase in overall capital spending of approximately $109.6 million. In 2005, we drilled 146 gross wells compared to 71 in 2004. Cash flows used in investing activities increased $396.9 million from 2003 to $400.5 million in 2004 primarily due to the acquisition activity discussed above.

On January 27, 2006, the Company completed the acquisition of all of the issued and outstanding common stock of Winwell Resources, Inc. Winwell pursuant to a Stock Purchase Agreement with Winwell and all of its shareholders made and entered into as of December 14, 2005 (the Stock Purchase Transaction). The aggregate consideration paid in the Stock Purchase Transaction was approximately $208 million in cash after certain closing adjustments. Also on January 27, 2006, the Company completed its acquisition of assets pursuant to an Asset Purchase Agreement with Redley, made and entered into as of December 14, 2005, as amended, (the Asset Purchase Transaction). The aggregate consideration paid in the Asset Purchase Transaction was approximately $86 million in cash after certain closing adjustments. The Company deposited $15 million in earnest money under the terms of the Stock Purchase Transaction, and $7.5 million under the terms of the Asset Purchase Transaction. The $22.5 million deposit was included in other non-current assets at December 31, 2005. The deposit and any interest earned thereon was applied to the overall purchase price.

We have established a capital budget of $210 million for 2006 to be funded primarily from cash flows from operations. We establish the budget for these amounts based on our current estimate of future commodity prices. Due to the volatility of commodity prices our budget may be periodically adjusted.

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Financing Activities. Net cash provided by financing activities in 2005 was $77.9 million compared to $386.1 million in 2004. At December 31, 2005, we had $210 million of debt outstanding under our senior revolving credit facility, which provides for a borrowing base of $260 million. It is subject to adjustment on the basis of the present value of estimated future net cash flows from proved oil and gas reserves (as determined by the banks’ petroleum engineer). We strive to manage our debt at a level below the available credit line in order to maintain excess borrowing capacity. Management believes that we have the ability to finance through new debt or equity offerings, if necessary, our capital requirements, including potential acquisitions. We also had net borrowings from our long-term debt facilities of $95.5 million due to our acquisition and divestiture activities during the year.

Financing activities in 2005 also included $28.9 million of cash paid on settled derivative contracts that were acquired in conjunction with our acquisition activity.

During 2005, we paid $0.3 million of the $0.4 million declared dividends on our 8% cumulative convertible preferred stock, with the remaining $0.1 million accrued in current liabilities and paid in January 2006.

We believe that we have the ability to finance through new debt or equity offerings, if necessary, our capital requirements, including acquisitions.

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Contractual Obligations

We have no material long-term commitments associated with our capital expenditure plans or operating agreements. Consequently, we believe we have a significant degree of flexibility to adjust the level of such expenditures as circumstances warrant. Our level of capital expenditures will vary in future periods depending on the success we experience in our acquisition, developmental and exploration activities, oil and gas price conditions and other related economic factors. Currently no sources of liquidity or financing are provided by off-balance sheet arrangements or transactions with unconsolidated, limited-purpose entities.

The following table summarizes our contractual obligations and commitments by payment periods (in thousands).

	Payments Due by Period
			Less than						More than
Contractual Obligations	Total		one year		1-3 years		3-5 years		5 years
Revolving credit facility	$	210,000	$	—	$	—	$	210,000	$	—
Second lien term loan facility (1)		150,000		1,500		3,000		145,500		—
9 7/8% senior notes due 2011 (2)		124,484		—		—		—		124,484
Interest expense on long-term debt (3)		170,735		38,469		76,541		52,424		3,301
Deferred premiums on derivatives (4)		4,105		1,288		2,817		—		—
Operating leases		5,840		2,196		2,890		754		—
Total contractual obligations	$	665,164	$	43,453	$	85,248	$	408,678	$	127,785

(1)	Includes $1.5 million of borrowings that have been classified as current at December 31, 2005.
(2)	Excludes $10.0 million of unamortized premium associated with the fair value calculation performed in accordance with purchase accounting, related to the Mission merger.
(3)	Future interest expense was calculated based on interest rates and amounts outstanding at December 31, 2005 less required annual repayments.
(4)	Includes $1.3 million of deferred premiums on derivatives that have been classified as current at December 31, 2005.

Amounts related to our asset retirement obligations are not included in the table above given the uncertainty regarding the actual timing of such expenditures. The total amount of asset retirement obligations at December 31, 2005 is $51.2 million.

Senior Revolving Credit Facility

We entered into a new senior revolving credit facility with BNP Paribas as the lead bank and administrative agent on November 23, 2004, in connection with the acquisition of Wynn Crosby. The $400 million revolving credit facility had an initial borrowing base of $200 million and a threshold amount of $180 million. On April 1, 2005, the borrowing base under the facility was changed to $185 million with a threshold amount of $175 million.

In connection with the Mission merger, we amended and restated our $400 million senior revolving credit facility agreement (Senior Credit Agreement) dated November 23, 2004. The amended Senior Credit Agreement provides for a borrowing base of $260 million that will be redetermined on a semi-annual basis, beginning April 1, 2006, with us and the lenders each having the right to one annual interim unscheduled redetermination, and adjusted based on our oil and gas properties, reserves, other indebtedness and other relevant factors. Upon a redetermination, we could be required to repay a portion of the bank debt.

Amounts outstanding under the Senior Credit Agreement bear interest at a specified margin over the London Interbank Offered Rate (LIBOR) of 1.25% to 2.00% for Eurodollar loans or at specified margins over the Alternate Base Rate (ABR) of 0.00% to 0.50% for ABR loans. Such margins will fluctuate based on the utilization of the facility. Borrowings under the Senior Credit Agreement are secured by first priority liens on substantially all of our assets, including equity interest in our subsidiaries. Amounts drawn on the facility mature on July 28, 2009.

The Senior Credit Agreement requires us to maintain certain financial covenants pertaining to minimum working capital levels, minimum coverage of interest expense, and a maximum leverage ratio. We may not permit our ratio of reserves to total debt to be less than 1.5 to 1.0. We may not permit our ratio of total debt to EBITDA (as defined in the debt agreement) for the period of four fiscal quarters immediately preceding the date of redetermination for which financial statements are available to be greater than 4.0 to 1.0. In addition, we are subject to covenants limiting dividends, and other restricted payments, transactions with affiliates, incurrence of debt, changing of control, asset sales,

27

and liens on properties. At December 31, 2005, we are in compliance with all of our debt covenants under the Senior Credit Agreement.

In connection with the North Louisiana Acquisitions and effective as of January 27, 2006, we amended our Senior Credit Agreement dated as of July 28, 2005, as amended. Pursuant to the amendment, the maximum credit amounts were increased to $600 million and the borrowing base was increased to $400 million. The execution of the amendment by the lenders also constituted a waiver by the lenders permitting the North Louisiana Acquisitions and provided for the repurchase of approximately 3.3 million shares of our common stock from EnCap Investments, L.P. and certain of its affiliates.

Second Lien Term Loan Facility

A second lien term loan facility (Term Loan) in the amount of $50 million was provided by BNP Paribas and a group of lenders. On July 28, 2005, our Term Loan was amended to increase the amount that we are permitted to borrow there under from $50 million to $150 million.

At the closing of the Mission merger, we had drawn $75 million under the Term Loan. By September 30, 2005 we had exercised our option to borrow an additional $75 million, applying the proceeds to outstanding borrowings under the Senior Credit Agreement. Amounts repaid under the Term Loan may not be re-borrowed. Amounts outstanding under the Term Loan bear interest at a specified margin over the LIBOR rate of 4.50% for Eurodollar loans or at specified margins over the ABR rate of 3.50% for ABR loans. Borrowings under the Term Loan are secured by second priority liens on all of the assets (including equity interests) that secure borrowings under the Senior Credit Agreement. We are subject to certain financial covenants pertaining to minimum asset coverage ratio and maximum leverage ratio. In addition, we are subject to covenants limiting dividends and other restricted payments, transactions with affiliates, incurrence of debt, changes of control, asset sales, and liens on properties. We are obligated to repay 1% per annum of the original principal balance beginning on July 28, 2006, with the remaining 96% of the original principal balance due and payable on July 28, 2010. At December 31, 2005, we are in compliance with all of our debt covenants under the Term Loan.

Also in connection with the North Louisiana Acquisitions and effective as of January 27, 2006, we amended our Term Loan dated as of July 28, 2005, as amended. Pursuant to the amendment, the maximum commitment amount thereunder was increased from $200 million to $300 million. Also under the amendment, an incremental commitment in the amount of $75 million which could be borrowed in connection with the North Louisiana Acquisitions was made available to us. The execution of the amendment by the lenders also constituted a waiver by the lenders permitting the North Louisiana Acquisitions and provided for the EnCap Transaction. All of our subsidiaries are parties to the supplement and amendment documents and have pledged all or substantially all of their assets as collateral for the loans.

9 7/8% Senior Notes

On April 8, 2004, Mission issued $130.0 million of its 9 7/8% senior notes due 2011 (the Notes) which were guaranteed on an unsubordinated, unsecured basis by all of its current subsidiaries. Interest on the Notes is payable semi-annually, on each April 1 and October 1, commencing on October 1, 2004. In conjunction with the Mission merger, we have assumed these Notes. Following the effectiveness of the Mission merger, we entered into a supplemental indenture (Indenture) whereby we assumed, and subsidiaries guaranteed, all the obligations of Mission under the Notes as set forth in the original indenture between Mission and the Bank of New York dated April 8, 2004.

The Notes are subordinate to the Senior Credit Agreement and Term Loan. At any time on or after April 9, 2005 and prior to April 9, 2008, we may redeem up to 35% of the aggregate principal amount of the Notes, using the net proceeds of equity offerings, at a redemption price equal to 109.875% of the principal amount of the Notes, plus accrued and unpaid interest. On or after April 9, 2008, we may redeem all or a portion of the Notes at redemption prices ranging from 100% in 2010 to approximately 105% in 2008. In November 2005, we acquired at market price $5.5 million face amount of the Notes from an investor and subsequently retired those Notes.

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Upon the effectiveness of the Mission merger, a change of control (as defined in the Indenture) occurred and pursuant to the Indenture, we were obligated to make a change of control offer (as defined in the Indenture) within 30 days after the change of control. The offer price was 101% of the aggregate principal amount of the Notes, plus accrued and unpaid interest and was made to all noteholders. The offer has expired; and one noteholder with a $10,000 principal balance Note accepted our offer.

As discussed above, on or after April 9, 2008, we may redeem all or a portion of the Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if redeemed during the twelve-month period beginning on April 9 of the years indicated below:

Year	Percentage
2008		104.94	%
2009		102.47	%
2010		100.00	%

The purchase method of accounting for the Mission merger required that we record the assets and liabilities acquired at fair value. The Notes were trading at a premium on the merger date; therefore, an $11.1 million premium on the Notes was recorded to reflect the merger date fair value of the Notes on Petrohawk’s balance sheet. The premium will be amortized over the life of the Notes using the effective interest method. The amortization resulted in a $0.6 million reduction of interest expense for the year ended December 31, 2005. Future amortization will result in a reduction of interest expense.

Off-Balance Sheet Arrangements

At December 31, 2005 and December 31, 2004, we did not have any off-balance sheet arrangements.

Plan of Operation for 2006

On an annual basis, we generally fund most of our capital and exploration activities, excluding major oil and gas property acquisitions, with cash generated from operations and, when necessary, our senior revolving credit facility. We budget these capital expenditures based on our projected cash flows for the year. We have budgeted $210 million in capital expenditures for 2006.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect our reported results of operations and the amount of reported assets, liabilities and proved oil and gas reserves. Some accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. Actual results may differ from the estimates and assumptions used in the preparation of our consolidated financial statements. Described below are the most significant policies we apply in preparing our consolidated financial statements, some of which are subject to alternative treatments under accounting principles generally accepted in the United States of America. We also describe the most significant estimates and assumptions we make in applying these policies. We discussed the development, selection and disclosure of each of these with our audit committee. See Results of Operations above and Item 8. Consolidated Financial Statements and Supplementary Data Note 1, Organization and Summary of Significant Events and Accounting Policies, for a discussion of additional accounting policies and estimates made by management.

Oil and Gas Activities

Accounting for oil and gas activities is subject to special, unique rules. Two generally accepted methods of accounting for oil and gas activities are available — successful efforts and full cost. The most significant differences between these two methods are the treatment of exploration costs and the manner in which the carrying value of oil and gas properties are amortized and evaluated for impairment. The successful efforts method requires exploration costs to be expensed as they are incurred while the full cost method provides for the capitalization of these costs. Both methods generally provide for the periodic amortization of capitalized costs based on proved reserve quantities. Impairment of oil and gas

29

properties under the successful efforts method is based on an evaluation of the carrying value of individual oil and gas properties against their estimated fair value, while impairment under the full cost method requires an evaluation of the carrying value of oil and gas properties included in a cost center against the net present value of future cash flows from the related proved reserves, using period-end prices and costs and a 10% discount rate.

Full Cost Method

We use the full cost method of accounting for our oil and gas activities. Under this method, all costs incurred in the acquisition, exploration and development of oil and gas properties are capitalized into a cost center (the amortization base). Such amounts include the cost of drilling and equipping productive wells, dry hole costs, lease acquisition costs and delay rentals. Costs associated with production and general corporate activities are expensed in the period incurred. The capitalized costs of our oil and gas properties, plus an estimate of our future development and abandonment costs, are amortized on a unit-of-production method based on our estimate of total proved reserves. Our financial position and results of operations would have been significantly different had we used the successful efforts method of accounting for our oil and gas activities.

Proved Oil and Gas Reserves

Our engineering estimates of proved oil and gas reserves directly impact financial accounting estimates, including depreciation, depletion and amortization expense and the full cost ceiling limitation. Proved oil and gas reserves are the estimated quantities of oil and gas reserves that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under period-end economic and operating conditions. The process of estimating quantities of proved reserves is very complex, requiring significant subjective decisions in the evaluation of all geological, engineering and economic data for each reservoir. The data for a given reservoir may change substantially over time as a result of numerous factors including additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. Changes in oil and gas prices, operating costs and expected performance from a given reservoir also will result in revisions to the amount of our estimated proved reserves.

Our estimated proved reserves for the years ended December 31, 2005 and 2003 were prepared by Netherland, Sewell, an independent oil and gas reservoir engineering consulting firm. The December 31, 2004 proved reserve estimates were prepared by Netherland Sewell with the exception of 26.2 Bcfe of proved reserves associated with royalty interest properties acquired from Wynn-Crosby and subsequently sold on February 25, 2005 which were not part of Netherland Sewell’s report. For more information regarding reserve estimation, including historical reserve revisions, refer to Item 8. Consolidated Financial Statements and Supplementary Data, Supplemental Oil and Gas Disclosure.

Depreciation, Depletion and Amortization

The quantities of estimated proved oil and gas reserves are a significant component of our calculation of depletion expense and revisions in such estimates may alter the rate of future expense. Holding all other factors constant, if reserves are revised upward, earnings would increase due to lower depletion expense. Likewise, if reserves are revised downward, earnings would decrease due to higher depletion expense or due to a ceiling test write-down.

Full Cost Ceiling Limitation

Under the full cost method, we are subject to quarterly calculations of a ceiling or limitation on the amount of our oil and gas properties that can be capitalized on our balance sheet. If the net capitalized costs of our oil and gas properties exceed the cost center ceiling, we are subject to a ceiling test write-down to the extent of such excess. If required, it would reduce earnings and impact stockholders’ equity in the period of occurrence and result in lower amortization expense in future periods. The discounted present value of our proved reserves is a major component of the ceiling calculation and represents the component that requires the most subjective judgments. However, the associated prices of oil and gas reserves that are included in the discounted present value of the reserves do not require judgment. The ceiling calculation dictates that prices and costs in effect as of the last day of the quarter are held constant. However, we may not be subject to a write-down if prices increase subsequent to the end of a quarter in which a write-down might otherwise be required. If oil and gas prices decline, even if for only a short period of time, or if we have downward revisions to our estimated proved reserves, it is possible that write-downs of our oil and gas properties could occur in the future.

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Future Development and Abandonment Costs

Future development costs include costs incurred to obtain access to proved reserves such as drilling costs and the installation of production equipment. Future abandonment costs include costs to dismantle and relocate or dispose of our production platforms, gathering systems and related structures and restoration costs of land and seabed. We develop estimates of these costs for each of our properties based upon their geographic location, type of production structure, well depth, currently available procedures and ongoing consultations with construction and engineering consultants. Because these costs typically extend many years into the future, estimating these future costs is difficult and requires management to make judgments that are subject to future revisions based upon numerous factors, including changing technology and the political and regulatory environment. We review our assumptions and estimates of future development and future abandonment costs on an annual basis.

The accounting for future abandonment costs changed on January 1, 2003 with the adoption of SFAS No. 143, Accounting for Asset Retirement Obligations. This new standard requires that a liability for the discounted fair value of an asset retirement obligation be recorded in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset.

Holding all other factors constant, if our estimate of future abandonment and development costs is revised upward, earnings would decrease due to higher depreciation, depletion and amortization (DD&A) expense. Likewise, if these estimates are revised downward, earnings would increase due to lower DD&A expense.

Allocation of Purchase Price in Business Combinations

As part of our business strategy, we actively pursue the acquisition of oil and gas properties. The purchase price in an acquisition is allocated to the assets acquired and liabilities assumed based on their relative fair values as of the acquisition date, which may occur many months after the announcement date. Therefore, while the consideration to be paid may be fixed, the fair value of the assets acquired and liabilities assumed is subject to change during the period between the announcement date and the acquisition date. Our most significant estimates in our allocation typically relate to the value assigned to future recoverable oil and gas reserves and unproved properties. As the allocation of the purchase price is subject to significant estimates and subjective judgments, the accuracy of this assessment is inherently uncertain.

Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, under which goodwill is no longer subject to amortization. Rather, goodwill of each reporting unit is tested for impairment on an annual basis, or more frequently if an event occurs or circumstances change that would reduce the fair value of the reporting unit below its carrying amount. In making this assessment, we rely on a number of factors including operating results, economic projections and anticipated cash flows. As there are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment, there is risk that the carrying value of our goodwill may be overstated. If it is overstated, such impairment would reduce earnings during the period in which the impairment occurs and would result in a corresponding reduction to goodwill.

Accounting for Derivative Instruments and Hedging Activities

We utilize derivative contracts to hedge against the variability in cash flows associated with the forecasted sale of our anticipated future oil and gas production. We generally hedge a substantial, but varying, portion of our anticipated oil and gas production for the next 12-36 months. We do not use derivative instruments for trading purposes. We have elected not to apply hedge accounting to our derivative contracts, which would potentially allow us to not record the change in fair value of our derivative contracts in the statement of operations. We carry our derivatives at fair value on our consolidated balance sheet, with the changes in the fair value included in our statement of operations in the period in which the change occurs. Our results of operations would potentially have been significantly different had we elected and qualified for hedge accounting on our derivative contracts.

In determining the amounts to be recorded, we are required to estimate the fair values of the derivative instruments. We currently use an independent, third-party service to estimate the fair value of our derivative contracts. The estimates of fair value that we receive are based upon various factors that include closing prices on the NYMEX, volatility and the time value of options. These pricing and discounting variables are sensitive to market volatility as well as changes in future price forecasts and interest rates.

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Comparison of Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

We had a net loss of $16.6 million for the year ended December 31, 2005 compared to net income of $8.1 million for 2004. The net loss in 2005 resulted from a pre-tax loss on derivative contracts of $100.4 million.

The following table summarizes key items of comparison and their related increase (decrease) for the year ended December 31 for the periods indicated.

	Years Ended December 31,						Increase
In Thousands	2005			2004			(Decrease)
Net (loss) income	$	(16,634	)	$	8,117		$	(24,751	)
Oil and gas sales		258,039			33,577			224,462
Production expenses:
Lease operating		30,784			5,540			25,244
Workover and other		3,265			294			2,971
Taxes other than income		18,497			2,319			16,178
Gathering, transportation and other		2,030			26			2,004
General and administrative:
General and administrative		21,214			7,802			13,412
Stock-based compensation		3,820			3,529			291
Depletion — Full cost		72,716			9,117			63,599
Depreciation — Other		666			114			552
Accretion expense		1,157			137			1,020
Net (loss) gain on derivative contracts		(100,380	)		7,441			(107,821	)
Interest expense and other (1)		(29,207	)		(2,894	)		(26,313	)
Income tax benefit (provision)		9,063			(1,129	)		10,192
Production:
Natural Gas — Mmcf		20,219			3,569			16,650
Crude Oil — Mbbl		1,555			244			1,311
Natural Gas Equivalent — Mmcfe		29,549			5,030			24,519
Average price per unit (2):
Gas price per Mcf	$	8.46		$	6.53		$	1.93
Oil price per Bbl		55.62			40.71			14.91
Equivalent per Mcfe		8.73			6.61			2.12
Average cost per Mcfe:
Production expenses:
Lease operating		1.04			1.10			(0.06	)
Workover and other		0.11			0.06			0.05
Taxes other than income		0.63			0.46			0.17
Gathering, transportation and other		0.07			0.01			0.06
General and administrative expense:
General and administrative		0.72			1.55			(0.83	)
Stock-based compensation		0.13			0.70			(0.57	)
Depletion expense		2.46			1.81			0.65

(1)	Includes $2.9 million non cash charge related to the modification of the Term Loan during the third quarter of 2005.
(2)	Amounts exclude the impact of cash paid on settled contracts as we did not elect to apply hedge accounting.

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For the year ended December 31, 2005, oil and gas sales increased $224.5 million, from the same period in 2004, to $258.0 million. The increase for the year was primarily due to the increase in production of 24,519 Mmcfe, of which 8,798 Mmcfe related to the acquisition of Mission and 1,907 Mmcfe related to the acquisition of Proton in 2005. The remaining increase in volumes was due to the inclusion of a full year of production for Wynn-Crosby as well as our increased drilling success. Higher commodity prices led to an approximate $62.6 million increase in revenues from the prior year as our realized average price per Mcfe increased $2.12 in 2005 to $8.73 from $6.61 in 2004. Prices continued to be strong in 2005 due to a number of factors including Hurricanes Rita and Katrina, inventory storage levels and continued supply concerns due to both domestic and global events.

Lease operating expenses increased $25.2 million for the year ended December 31, 2005 as compared to the same period in 2004. The increase was primarily due to the acquisition of Wynn-Crosby in November of 2004 and Mission and Proton during 2005, as well as an increase in overall activity in 2005. We drilled 146 gross wells in 2005 compared to only 71 gross wells in 2004. On a per unit basis, lease operating expenses decreased 5% from $1.10 per Mcfe in 2004 to $1.04 per Mcfe in 2005 primarily as our increase in production of 24,519 Mcfe offset the increase in overall costs.

Workover and other expense increased $3.0 million for the year ended December 31, 2005 as compared to the same period in 2004. The increase was primarily due to the increase in major maintenance activities as commodity prices have remained high as well as the acquisitions of Wynn-Crosby in 2004 and Proton and Mission in 2005. On a per unit basis, workover and other expense increased $0.05 per Mcfe to $0.11 per Mcfe in 2005 due to a number of higher cost activities that were undertaken by us based on the current period price environment.

Taxes other than income increased $16.2 million for the year ended December 31, 2005 as compared to the same period in 2004. A significant component of such increase related to production taxes which are generally assessed as a percentage of gross oil and/or natural gas sales. In general, production taxes increase as revenue and production increase.

Gathering, transportation and other expense increased $2.0 million for the year ended December 31, 2005 as compared to the same prior in 2004, due to the acquisition of Wynn-Crosby and Mission.

General and administrative expense for the twelve months ended December 31, 2005 increased $13.4 million to $21.2 million compared to $7.8 million in the same period in 2004. This increase was directly related to our continued growth over the past two years. Office expenses increased with our relocation of the corporate office to Houston, Texas and the subsequent expansion of the office following the July 2005 acquisition of Mission. Salaries and benefits increased with the addition of new staff and annual salary increases for existing employees. Overall headcount increased to 154 full time employees in 2005 as compared to 43 in 2004, driven by the decision to bring the previously outsourced accounting function back in house as well as the recent acquisition activity. On an Mcfe basis, general and administrative costs decreased $0.83 per Mcfe in 2005 to $0.72 per Mcfe as compared to $1.55 per Mcfe in 2004 due to the synergies achieved from the Wynn-Crosby, Proton and Mission acquisitions. For the twelve months ended December 31, 2005, stock-based compensation was $3.8 million, an increase of $0.3 million over prior year.

Accretion expense increased $1.0 million from the same period in 2004 to $1.2 million for the year ended December 31, 2005. The increase was due to the inclusion of a full year of accretion expense for Wynn-Crosby which increased the overall liability $10.8 million in 2004 and the acquisitions of Proton and Mission in 2005 which increased the liability $38.5 million in 2005.

Depletion expense increased $63.6 million from the same period in 2004 to $72.7 million for the year ended December 31, 2005. Depletion for oil and gas properties is calculated using the unit of production method, which essentially depletes the capitalized costs associated with the evaluated properties based on the ratio of production volume for the current period to total remaining reserve volume for the evaluated properties. On a per unit basis, depletion expense increased 36% from $1.81 to $2.46. This increase was due to our acquisition and divestiture activities in 2005.

Periodically, we enter into derivative commodity instruments to hedge our exposure to price fluctuations on oil and gas production. At December 31, 2005, we had a $3.5 million derivative asset, $1.3 million of which was classified as current, and an $86.8 million derivative liability, $51.1 million of which was classified as current. The change in the unrealized fair value of these derivative positions was included in earnings along with the realized losses incurred. We recorded a net derivative loss of $100.4 million for the year ended December 31, 2005 compared to a net gain of $7.4 million at December 31, 2004.

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Interest expense and other increased $26.3 million for the year ended December 31, 2005 compared to the same period in 2004. This increase was primarily due to the assumption of $130 million of Mission’s 9 7/8% notes due 2011, the expensing of debt issue costs, a one-time payment made upon conversion of the $35 million PHAWK Note during the second quarter of 2005 and to the $55 million increase in our senior revolving credit facility and the $100 million increase in our second lien term loan facility, most of which were used to fund the Mission acquisition.

Income tax benefit increased $10.2 million. This increase was primarily due to the increase in our pre-tax loss from prior year. Our 2005 effective tax rate was 35.3% compared to 12.2% in 2004. The difference in the rate is the result of a valuation allowance reversal of $2.4 million in 2004.

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Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

We had net income of $8.1 million for the year ended December 31, 2004 compared to $1.0 million for 2003. The $425 million acquisition of Wynn-Crosby and the $60 million recapitalization by PHAWK, LLC of the Company, as well as the $1.83 per Mcfe increase in our realized equivalent average price for the year were the primary reasons for the increase in net income.

The following table summarizes key items of comparison and their related increase (decrease) for the year ended December 31 for the periods indicated.

	Years Ended December 31,						Increase
In Thousands	2004			2003			(Decrease)
Net income	$	8,117		$	968		$	7,149
Oil and gas sales		33,577			12,925			20,652
Production expenses:
Lease operating		5,540			2,516			3,024
Workover and other		294			25			269
Taxes other than income		2,319			875			1,444
Gathering, transportation and other		26			46			(20	)
General and administrative:
General and administrative		7,802			2,678			5,124
Stock-based compensation		3,529			252			3,277
Full cost ceiling impairment		—			129			(129	)
Depletion — Full cost		9,117			4,671			4,446
Depreciation — Other		114			187			(73	)
Accretion expense		137			50			87
Net gain (loss) on derivative contracts		7,441			—			7,441
Interest expense and other		(2,894	)		(506	)		(2,388	)
Income tax provision		(1,129	)		(24	)		(1,105	)
Production:
Natural Gas — Mmcf		3,569			1,859			1,710
Crude Oil — Mbbl		244			129			115
Natural Gas Equivalent — Mmcfe		5,030			2,632			2,398
Average price per unit (1):
Gas price per Mcf	$	6.53		$	4.71		$	1.82
Oil price per Bbl		40.71			27.36			13.35
Equivalent per Mcfe		6.61			4.78			1.83
Average cost per Mcfe:
Lease operating expense		1.10			0.96			0.14
Workover and other		0.06			0.01			0.05
Taxes other than income		0.46			0.33			0.13
Gathering, transportation and other		0.01			0.02			(0.01	)
General and administrative expense:
General and administrative		1.55			1.02			0.53
Stock-based compensation		0.70			0.10			0.60
Depletion expense		1.81			1.77			0.04

⁽¹⁾ 2004 amounts exclude the impact of cash paid on settled contracts as we did not elect to apply hedge accounting.

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For the year ended December 31, 2004, oil and gas sales increased $20.7 million, from the same period in 2003, to $33.6 million. The increase for the year was primarily due to the increase in volumes of approximately 2,398 Mmcfe that was comprised of a 684 Mmcfe increase for Petrohawk and a 1,714 Mmcfe increase due to the acquisition of Wynn-Crosby. Higher commodity prices led to an approximate $9.2 million increase in revenues from the prior year as our realized average price per Mcfe increased $1.83 in 2004 to $6.61 from $4.78 in 2003. Continued lower natural gas storage levels, supply uncertainty due to global events and a weaker U.S. dollar, favorably impacted crude oil prices again in 2004.

Lease operating expenses increased $3.0 million for the year ended December 31, 2004 as compared to the same period in 2003. The increase was primarily due to the acquisition of Wynn-Crosby and an increase in overall activity in 2004 as we drilled 71 gross wells in 2004 compared to only 28 gross wells in 2003, as well as higher operating costs associated with our offshore Louisiana properties and other recently drilled wells in Kansas and Oklahoma. On a per unit basis, lease operating expenses increased 15% from $0.96 per Mcfe in 2003 to $1.10 per Mcfe in 2004 due to an increase in industry-wide service costs associated with the overall increase in commodity prices.

Taxes other than income increased $1.4 million for the year ended December 31, 2004 as compared to the same period in 2003 due to higher oil and gas revenues. Production taxes are generally assessed as a percentage of gross oil and/or natural gas sales.

General and administrative expense for the twelve months ended December 31, 2004 increased $5.1 million to $7.8 million compared to the same period in 2003. This increase was the result of a number of items including an increase in bonuses, our recapitalization by PHAWK, LLC, the resulting transition of our headquarters from Tulsa, Oklahoma to Houston, Texas, as well as an increase in salaries and benefits due to the increase in headcount. At December 31, 2004, we had 43 full-time employees as compared to 12 full-time employees at December 31, 2003.

Stock-based compensation expense was $3.5 million for the year ended December 31, 2004, an increase of $3.3 million over the same period in 2003. This increase is due to the $1.8 million recorded during the second quarter of 2004 as a result of the modification of stock options held by certain former employees, as well as $1.7 million recognized for current year stock option issuances under the fair value accounting method that we follow.

Depletion expense increased $4.4 million from the same period in 2003 to $9.1 million for the year ended December 31, 2004. Depletion for oil and gas properties is calculated using the unit of production method, which essentially depletes the capitalized costs associated with the evaluated properties based on the ratio of production volume for the current period to total remaining reserve volume for the evaluated properties. On a per unit basis, depletion expense remained relatively flat increasing 2.2% from $1.77 to $1.81 per Mcfe.

Interest expense and other increased $2.4 million for the year ended December 31, 2004 compared to the same period 2003. This increase is primarily due to the issuance of the $35 million 8% subordinated convertible note payable issued in our recapitalization by PHAWK, LLC and the $210 million debt that was incurred in association with the acquisition of Wynn-Crosby.

Periodically, we enter into derivative commodity instruments to hedge our exposure to price fluctuations on oil and gas production. At December 31, 2004, we had a $8.3 million derivative receivable and a $2.1 million derivative liability. The change in the unrealized fair value of these derivative positions are included in earnings along with all realized gains and losses. We had recorded a net derivative gain of $7.4 million for the year ended December 31, 2004.

Income tax expense increased approximately $1.1 million from prior year. This increase is primarily due to the increase in net income offset by valuation allowance adjustments of $2.4 million.

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Related Party Transactions

On May 25, 2004, PHAWK, LLC (formerly known as Petrohawk Energy, LLC) (PHAWK), which is owned by affiliates of EnCap Investments, L.P., Liberty Energy Holdings LLC, Floyd C. Wilson and other members of our management, purchased a controlling interest in us for $60 million in cash. The $60 million investment was structured as the purchase by PHAWK of 7.576 million shares of our common stock for $25 million, a $35 million five year 8% subordinated note convertible into approximately 8.75 million shares of our common stock and warrants to purchase 5 million shares of our common stock at a price of $3.30 per share (after giving effect to a one-for-two reverse split of our common stock implemented in May 2004). In connection with the investment by PHAWK, Mr. Wilson was named our Chairman, President and Chief Executive Officer, our board of directors and other management was changed, and our corporate offices were relocated from Tulsa, Oklahoma to Houston, Texas. Also, at our annual stockholders meeting held July 15, 2004, our stockholders approved changing our name to Petrohawk Energy Corporation (from Beta Oil & Gas, Inc.), reincorporating the Company in Delaware, and the adoption of new stock option plans.

On June 30, 2005, we entered into an agreement with PHAWK to convert the $35 million note payable to PHAWK to common stock as stipulated in the original agreement. The original agreement contained a provision providing for conversion into 8.75 million shares of Petrohawk common stock at any time after May 25, 2006. In consideration of the early conversion, we agreed to make a payment of $2.4 million, which represented the interest payable on the note through May 25, 2006, discounted at 10%. In conjunction with the conversion, we expensed $1.1 million of net debt issuance costs that were being amortized over the remaining life of the note. These charges are reflected in interest expense and other on the consolidated statement of operations.

A Special Committee of one disinterested director was formed by our board of directors to evaluate the transaction. On June 30, 2005, the Special Committee approved the transaction.

On August 11, 2004 we purchased working interests in certain oil and gas properties and various other assets from PHAWK for $8.5 million. The effective date of the acquisition was June 1, 2004. Since the Company and PHAWK were under common control, the assets were recorded at the net book value of PHAWK at the time of the sale. The purchase price exceeded the net book value by approximately $5.6 million. The excess was reflected as a return of capital to PHAWK on the consolidated statement of operations.

A special committee of one disinterested director was formed by our board of directors to evaluate, negotiate and complete the purchase. The Special Committee hired an independent reservoir engineering firm to provide a reserve evaluation and engaged an independent financial advisor to evaluate the fairness, from a financial point of view, to us. The independent financial advisor rendered a fairness opinion to the Special Committee.

Recently Issued Accounting Standards

In March 2005, the Financial Accounting Standard Board (FASB) issued FASB Interpretation (FIN) No. 47 (FIN 47), Accounting for Conditional Asset Retirement Obligations. This Interpretation clarifies the definition and treatment of conditional asset retirement obligations as discussed in FASB Statement No. 143, Accounting for Asset Retirement Obligations (SFAS 143). A conditional asset retirement obligation is defined as an asset retirement activity in which the timing and/or method of settlement are dependent on future events that may be outside our control. FIN 47 states that a company must record a liability when incurred for conditional asset retirement obligations if the fair value of the obligation is reasonably estimable. This Interpretation is intended to provide more information about long-lived assets, future cash outflows for these obligations and more consistent recognition of these liabilities. FIN 47 is effective for fiscal years ending after December 15, 2005. The adoption of this Interpretation did not materially impact our operating results, financial position or cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)). SFAS 123(R) is a revision of SFAS No. 123, Accounting for Stock Based Compensation (SFAS 123), and supersedes APB 25, Accounting for Stock Issued to Employees. Among other items, SFAS 123(R) eliminates the use of APB 25 and the intrinsic value method of accounting and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those awards in their financial statements. We currently utilize the Black-Scholes option pricing model to measure the fair value of stock options granted and plans to continue to use that model upon adoption of SFAS 123(R). We are in the process of finalizing the adoption of SFAS 123(R) and does not expect it to materially impact our future operating results.

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In March 2005, the SEC issued SAB 107 on SFAS No. 123(R) (SAB 107). SAB 107 reinforces the flexibility allowed by SFAS 123(R) to choose an option pricing model, provides guidance on when it would be appropriate to rely exclusively on either historical or implied volatility in estimating expected volatility and provided examples and simplified approaches to determining the expected term. In April 2005, the SEC extended the date by which companies are required to adopt SFAS 123(R) from the first reporting period beginning on or after June 15, 2005 to the first reporting period of the first fiscal year beginning on or after June 15, 2005.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Oil and gas prices fluctuate widely, and low prices for an extended period of time are likely to have a material adverse impact on our business.

Our operating revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing prices for gas and, to a lesser extent, oil. Declines in oil and gas prices may materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Lower oil and gas prices may also reduce the amount of oil and gas that we can produce economically. Historically, oil and gas prices and markets have been volatile, with prices fluctuating widely and they are likely to continue to be volatile.

Prices for oil and gas are subject to wide fluctuations in response to relatively minor changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors that are beyond our control. These factors include:

• The domestic and foreign supply of oil and gas;

• The level of consumer product demand;

• Weather conditions;

• Political conditions in oil producing regions, including the Middle East;

• The ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

• The price of foreign imports;

• Actions of governmental authorities;

• Domestic and foreign governmental regulations;

• The price, availability and acceptance of alternative fuels; and

• Overall economic conditions.

These factors make it impossible to predict with any certainty the future prices of oil and gas.

We use hedges to reduce price volatility, help ensure that we have adequate cash flow to fund our capital programs and manage price risks and returns on some of our acquisitions and drilling programs. Our decision on the quantity and price at which we choose to hedge our production is based in part on our view of current and future market conditions. For the twelve months ended December 31, 2005, we had hedges covering 13,867,500 Mmbtus of natural gas and 1,044,200 Bbls of crude oil as compared to 705,000 Mmbtus and 27,500 Bbls, respectively, in 2004.

Derivative Instruments and Hedging Activity

Periodically, we enter into derivative commodity instruments to hedge our exposure to price fluctuations on oil and gas production. Under collar arrangements, if the index price rises above the ceiling price, we pay the counterparty. If the index price falls below the floor price, the counterparty pays us. Under price swaps, we receive a fixed price on a notional quantity of oil and gas in exchange for paying a variable price based on a market-based index, such as NYMEX oil and gas futures.

At December 31, 2005, we had 48 open positions: 20 natural gas price collar arrangements, one natural gas price swap arrangement, four natural gas put options, one crude oil price swap arrangement and 22 crude oil collar arrangements. We elected not to designate any positions as cash flow hedges for accounting purposes, and accordingly, record the net change in the mark-to-market valuation of these derivative contracts in the consolidated statement of operations.

At December 31, 2005, we had a $3.5 million derivative asset, $1.3 million of which is classified as current, and a $86.8 million derivative liability, $51.1 million of which is classified as current. The weighted average of the forward strip prices used to value the derivative liability were $63.14 per barrel of oil and $10.41 per mcf of natural gas. On the July 28, 2005 merger date, we acquired a $29.4 million derivative liability from Mission. At December 31, 2005, the fair value of the derivatives acquired from Mission was $22.7 million.

We recorded a net derivative loss of $100.4 million for the year ended December 31, 2005.

At December 31, 2004, we had 90 open positions: 35 natural gas price collar arrangements, 12 natural gas price swap arrangements, seven natural gas put options, nine crude oil price swap arrangements and 27 crude oil collar arrangements. During 2004, we elected not to designate any positions as cash flow hedges for accounting purposes.

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At December 31, 2004, we had an $8.3 million derivative receivable and a $2.1 million derivative liability. In addition, we recorded a net derivative gain of $7.4 million for the year ended December 31, 2004.

For the year ended December 31, 2003, we designated our derivative positions as hedges against the variability in cash flows associated with the forecasted sale of future oil and gas accounted for under the guidelines stipulated by SFAS 133. At December 31, 2003, we had no open positions but we recognized a net $0.6 million loss on derivative contracts for the year ended December 31, 2003.

Natural Gas

At December 31, 2005, we had the following natural gas costless collar positions:

			Contract Price per Mmbtu
			Collars
			Floors			Ceilings
	Volume in		Price /	Weighted		Price /	Weighted
Period	Mmbtu’s		Price Range	Average Price		Price Range	Average Price
January 2006 - December 2006		15,175,000	$5.00 — $6.26	$	5.79	$7.08 — $10.87	$	9.05
January 2007 - December 2007		6,530,000	5.30 —   6.00		5.69	7.12 —   15.35		11.72
January 2008 - December 2008		3,600,000	5.00 —   5.15		5.05	6.45 —     6.71		6.53

At December 31, 2005, we had the following natural gas swap position:

Contract Price per Mmbtu
Swaps
	Volume in		Weighted
Period	Mmbtu’s		Average Price
January 2007 — December 2007		1,200,000	$	6.06

At December 31, 2005, we had the following natural gas put options:

Contract Price per Mmbtu
Floors
	Volume in		Weighted
Period	Mmbtu’s		Average Price
January 2006 — December 2006		5,400,000	$	8.00
January 2007 — December 2007		3,600,000		8.00

During the fourth quarter of 2005, we entered into three natural gas put option contracts covering 5,400,000 Mmbtus of anticipated production in 2006 and one natural gas put option contract covering 3,600,000 Mmbtus of anticipated production in 2007. These natural gas put option contracts contain deferred premiums that will be paid as the contracts expire. We have recorded a deferred premium liability of $4.1 million as of December 31, 2005 based on a weighted average deferred premium of $0.24 per Mmbtu in 2006 and $0.78 per Mmbtu in 2007.

40

Crude Oil

At December 31, 2005, we had the following crude oil costless collar positions:

			Contract Price per Bbl
			Collars
			Floors				Ceilings
	Volume in		Price /		Weighted		Price /		Weighted
Period	Bbls		Price Range		Average Price		Price Range		Average Price
January 2006 - December 2006		1,338,750	$	26.03 — $45.48	$	38.17	$	30.15 — $62.70	$	50.78
January 2007 - December 2007		240,000		35.00 —   36.00		35.30		43.20 —   45.75		43.97
January 2008 - December 2008		60,000		34.00		34.00		45.30		45.30

At December 31, 2005, we had the following crude oil swap position:

Contract Price per Bbl
Swaps
	Volume in		Weighted
Period	Bbls		Average Price
January 2008 — December 2008		144,000	$	38.10

For more information, refer to Item 8. Consolidated Financial Statements and Supplementary Data, Note 7 Derivative and Hedging Activities.

Fair Market Value of Financial Instruments

The estimated fair values for financial instruments under FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, cash equivalents, accounts receivable and accounts payable approximates their carrying value due to their short-term nature. The estimated fair value of senior revolving credit facility and the second lien term loan facility approximates its carrying value because the debt carries interest rates that approximate current market rates. The 9 7/8% notes were trading at $103.25 at year end 2005 and would have a fair value of $128.5 million at December 31, 2005, as compared to the book value of $124.5 million, excluding the unamortized premium.

Interest Sensitivity

Our senior revolving credit facility and our second lien term loan facility are based on variable interest rates that approximate current market rates. A one percent increase or decrease in these rates would result in a $14.3 million change in our interest expense over the life of our long-term debt. Should interest rates increase we believe we have adequate capital resources to meet the cash requirements of the Company.

41

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Management’s Report on Internal Control Over Financial Reporting		42
Reports of Independent Registered Public Accounting Firms		43
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003		46
Consolidated Balance Sheets at December 31, 2005 and 2004		47
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003		49
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003		50
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2005, 2004 and 2003		51
Notes to the Consolidated Financial Statements		52
Supplemental Oil and Gas Information (Unaudited)		80
Quarterly Financial Information (Unaudited)		83

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that Petrohawk Energy Corporation’s internal control over financial reporting was effective as of December 31, 2005. We excluded the acquisition of Mission Resources Corporation (“Mission”) from our assessment of internal control over financial reporting as of December 31, 2005 because Mission was acquired in a business combination on July 28, 2005. Mission’s total assets and revenues constitute 57 and 33 percent, respectively, of the related consolidated financial statements of the Company as of and for the year ended December 31, 2005

Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005, was audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

/s/ Floyd C. Wilson	/s/ Shane M. Bayless
Floyd C. Wilson	Shane M. Bayless
Chairman of the Board, President and Chief Executive Officer	Executive Vice President, Chief Financial Officer and Treasurer

Houston, Texas
March 13, 2006

42

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Petrohawk Energy Corporation
Houston, Texas

We have audited the accompanying consolidated balance sheets of Petrohawk Energy Corporation and subsidiaries (formerly Beta Oil and Gas, Inc.) (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity, cash flows, and comprehensive income (loss) for each of the two years in the period ended December 31, 2005. We also have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Report of Management”), that the Company maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Report of Management, management excluded from their assessment the internal control over financial reporting at Mission Resources Corporation and subsidiaries (“Mission”), which was acquired on July 28, 2005 and whose consolidated financial statements reflect total assets and revenues constituting 57 and 33 percent, respectively, of the related consolidated financial statements of the Company as of and for the year ended December 31, 2005. Accordingly, our audit did not include the internal control over financial reporting at Mission. The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these financial statements, an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of

43

the Treadway Commission. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas
March 13, 2006

44

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
of Beta Oil & Gas, Inc.

We have audited the accompanying consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Beta Oil & Gas, Inc. for the year ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.

As discussed in Notes 1 and 5 to the consolidated financial statements, effective January 1, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards No. 143, Asset Retirement Obligations. In addition, as also discussed in Note 1, effective January 1, 2003, the Company adopted, prospectively, the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.

/s/ Ernst & Young LLP

Tulsa, Oklahoma
March 19, 2004

45

PETROHAWK ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

	Years Ended December 31,
	2005			2004			2003
Operating revenues:
Oil and gas sales	$	258,039		$	33,577		$	12,925
Operating expenses:
Production expenses:
Lease operating		30,784			5,540			2,516
Workover and other		3,265			294			25
Taxes other than income		18,497			2,319			875
Gathering, transportation and other		2,030			26			46
General and administrative:
General and administrative		21,214			7,802			2,678
Stock-based compensation		3,820			3,529			252
Full cost ceiling impairment		—			—			129
Depletion, depreciation and amortization		73,382			9,231			4,858
Accretion expense		1,157			137			50
Total operating expenses		154,149			28,878			11,429
Income from operations		103,890			4,699			1,496
Other income (expense):
Net (loss) gain on derivative contracts		(100,380	)		7,441			—
Interest expense and other		(29,207	)		(2,894	)		(506	)
Total other income (expense):		(129,587	)		4,547			(506	)
(Loss) income before income taxes		(25,697	)		9,246			990
Income tax benefit (provision)		9,063			(1,129	)		(24	)
Net (loss) income before cumulative effect of accounting change		(16,634	)		8,117			966
Cumulative effect of accounting change		—			—			2
Net (loss) income		(16,634	)		8,117			968
Preferred dividends		(440	)		(445	)		(447	)
Net (loss) income applicable to common shareholders	$	(17,074	)	$	7,672		$	521
(Loss) Earnings Per Share of Common Stock:
Basic	$	(0.31	)	$	0.71		$	0.08
Diluted	$	(0.31	)	$	0.36		$	0.08
Weighted average shares outstanding:
Basic		54,752			10,808			6,216
Diluted		54,752			25,690			6,253

The accompanying notes are an integral part of these consolidated financial statements.

46

PETROHAWK ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS
(In thousands)

	December 31,
	2005			2004
Current assets:
Cash and cash equivalents	$	12,911		$	5,660
Accounts receivable		68,087			23,151
Deferred income taxes		18,304			—
Receivables from price risk management activities		1,286			4,973
Prepaid expenses and other		5,393			2,238
Total current assets		105,981			36,022
Oil and gas properties (full cost method):
Evaluated properties		1,096,810			484,233
Unevaluated properties		162,133			48,840
Total gross oil and gas properties		1,258,943			533,073
Less — accumulated depletion and depreciation		(121,456	)		(48,740	)
Net oil and gas properties		1,137,487			484,333
Other operating property and equipment
Gas gathering system and equipment		1,508			1,504
Other		3,555			1,261
Total gross other operating property and equipment		5,063			2,765
Less — accumulated depreciation		(1,600	)		(934	)
Net other operating property and equipment		3,463			1,831
Other noncurrent assets
Goodwill		132,029			—
Debt issuance costs, net of amortization		1,969			3,875
Receivables from price risk management activities		2,252			3,363
Deferred income taxes		—			981
Other		26,993			3,794
Total assets	$	1,410,174		$	534,199

The accompanying notes are an integral part of these consolidated financial statements.

47

PETROHAWK ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands, except share and per share data)

	December 31,
	2005			2004
Current liabilities:
Accounts payable and accrued liabilities	$	90,017		$	24,676
Liabilities from price risk management activities		51,081			1,990
Current portion of long-term debt		2,788			500
Total current liabilities		143,886			27,166
Long-term debt		495,801			239,500
Liabilities from price risk management activities		35,695			67
Asset retirement obligations		50,133			12,726
Deferred income taxes		153,155			—
Other noncurrent liabilities		5,046			7,649
Commitments and contingencies		—			—
Stockholders’ equity:
Convertible Preferred stock: 5,000,000 shares of $.001 par value authorized; 593,271 and 598,271 shares issued and outstanding at December 31, 2005 and 2004; liquidation value at December 31, 2005 and 2004 of $5.5 million		1			1
Common stock: 125,000,000 and 75,000,000 shares of $.001 par value authorized at December 31, 2005 and 2004; 73,566,117 and 39,788,238 shares issued and outstanding at December 31, 2005 and 2004		74			40
Additional paid-in capital		558,452			262,045
Treasury stock, at cost, 8,382 shares reacquired at December 31, 2005 and 2004		(36	)		(36	)
Accumulated deficit		(32,033	)		(14,959	)
Total stockholders’ equity		526,458			247,091
Total liabilities and stockholders’ equity	$	1,410,174		$	534,199

The accompanying notes are an integral part of these consolidated financial statements.

48

PETROHAWK ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)

											Additional						Accumulated						Total
	Preferred						Common				Paid in			Treasury			Comprehensive			Accumulated			Stockholders’
	Shares			Amount			Shares		Amount		Capital			Stock			Income			Deficit			Equity
Balance at January 1, 2003		604		$	1			6,223	$	6	$	51,923		$	(28	)	$	(702	)	$	(23,152	)	$	28,048
Equity compensation vesting												252												252
Treasury stock acquired															(8	)								(8	)
Offering costs												(245	)											(245	)
Preferred stock dividends																					(447	)		(447	)
Comprehensive Income																		702						702
Net income																					968			968
Balances at December 31, 2003		604		$	1			6,223	$	6	$	51,930		$	(36	)	$	—		$	(22,631	)	$	29,270
Equity compensation vesting								179		—		2,131												2,131
Warrants												2,027												2,027
Preferred stock acquired		(6	)		—							(55	)											(55	)
Preferred stock private placement		2,581			3							199,997												200,000
Preferred stock private placement conversion to common stock		(2,581	)		(3	)		25,806		26		(23	)											—
Return of Capital to PHAWK, LLC												(3,550	)											(3,550	)
Offering costs												(15,466	)											(15,466	)
Preferred stock dividends																					(445	)		(445	)
Common stock issuances								7,580		8		25,054												25,062
Net income																					8,117			8,117
Balances at December 31, 2004		598		$	1			39,788	$	40	$	262,045		$	(36	)	$	—		$	(14,959	)	$	247,091
Equity compensation vesting												3,449												3,449
Common stock issued for purchase of Mission Resourses								19,565		19		209,909												209,928
Conversion of LLC Note								8,750		9		34,991												35,000
Warrants excercised								1,645		2		(2	)											—
Equity related to Mission’s vested options												27,302												27,302
Preferred stock dividends																					(440	)		(440	)
Repurchase of preferred stock		(5	)		—							(46	)											(46	)
Common stock issuances								3,818		4		12,517												12,521
Tax benefit from exercise of stock options												8,287												8,287
Net loss																					(16,634	)		(16,634	)
Balances at December 31, 2005		593		$	1			73,566	$	74	$	558,452		$	(36	)	$	—		$	(32,033	)	$	526,458

The accompanying notes are an integral part of these consolidated financial statements.

49

PETROHAWK ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Years Ended December 31,
	2005			2004			2003
Cash flows from operating activities:
Net (loss) income	$	(16,634	)	$	8,117		$	968
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization		73,382			9,231			4,858
Amortization of debt issue costs		1,839			214			—
Full cost ceiling impairment		—			—			129
Deferred income tax (provision) benefit		(9,533	)		1,153			—
Stock-based compensation		3,820			3,529			252
Accretion expense		1,157			137			50
Net unrealized loss (gain) on mark-to-market derivative contracts		64,180			(8,603	)		—
Net realized loss on mark-to-market derivative contracts acquired		28,931			—			—
Other		(1,903	)		59			(1	)
Change in assets and liabilities, net of acquisitions:
Accounts receivable		(17,472	)		3,266			(356	)
Prepaid expenses and other		114			(815	)		(79	)
Accounts payable and accrued liabilities		8,298			1,655			(28	)
Other non-current assets		(733	)		—			—
Net cash provided by operating activities		135,446			17,943			5,793
Cash flows from investing activities:
Oil and gas expenditures		(121,041	)		(12,842	)		(4,043	)
Acquisition of Mission, net of cash acquired of $48,359		(96,545	)		—			—
Acquisition of Wynn-Crosby, net of cash acquired of $2,584		—			(384,521	)		—
Acquisition of Proton, net of cash acquired of $870		(52,625	)		—			—
Acquisition of oil and gas properties from PHAWK, LLC		—			(2,636	)		—
Proceeds received from sale of oil and gas properties		88,900			839			549
Gas gathering system and equipment expenditures		(2,298	)		(905	)		(52	)
Other		(22,500	)		(416	)		—
Net cash used in investing activities		(206,109	)		(400,481	)		(3,546	)
Cash flows from financing activities:
Proceeds from exercise of options		12,055			—			—
Proceeds from issuance of common stock and warrants		—			25,629			—
Proceeds from issuance of subordinated convertible note payable		—			35,000			—
Debt issue costs		—			(4,089	)		—
Return of capital to PHAWK, LLC		—			(5,684	)		—
Proceeds from borrowings		375,000			220,000			—
Repayment of borrowings		(279,510	)		(68,689	)		(364	)
Proceeds from Series B preferred stock private placement		—			200,000			—
Net realized loss on mark-to-market derivative contracts acquired		(28,931	)		—			—
Offering Costs		—			(15,466	)		(245	)
Dividends paid on Preferred Series A		(331	)		(558	)		(447	)
Other		(369	)		(55	)		(8	)
Net cash provided by (used in) financing activities		77,914			386,088			(1,064	)
Net increase in cash and cash equivalents		7,251			3,550			1,183
Cash and cash equivalents:
Beginning of period		5,660			2,110			927
End of period	$	12,911		$	5,660		$	2,110

The accompanying notes are an integral part of these consolidated financial statements.

50

PETROHAWK ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

	Years Ended December 31,
	2005			2004		2003
Comprehensive income (loss):
Net income (loss)	$	(16,634	)	$	8,117	$	968
Other comprehensive income:
Reclassification adjustment for settled contracts (net of income taxes)		—			—		1,337
Unrealized loss on qualifying cash flow hedges (net of income taxes)		—			—		(635	)
Total comprehensive income (loss)	$	(16,634	)	$	8,117	$	1,670

The accompanying notes are an integral part of these consolidated financial statements.

51

PETROHAWK ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Events and Accounting Policies

Basis of Presentation and Principles of Consolidation

Petrohawk Energy Corporation (Petrohawk or the Company) is an independent oil and gas company engaged in the acquisition, development, production and exploration of oil and gas properties located in North America. The Company operates in one segment, oil and gas exploration and exploitation, almost exclusively within the continental United States. The consolidated financial statements include the accounts of all majority-owned, controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation.

On May 18, 2004, the Company’s Board of Directors approved a one-for-two reverse stock split that was effective May 26, 2004. The reverse stock split was implemented to effect the conditional approval by the NASDAQ National Market of the Company’s listing application, which was later formally approved. Share and per share data (except par value) for all periods presented have been restated to reflect the reverse stock split.

Information regarding reserves, working interest, acreage and well head counts, to the extent disclosed, are unaudited.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the respective reporting periods. The estimates include oil and gas reserve quantities which form the basis for the calculation of amortization of oil and gas properties. Management emphasizes that reserve estimates are inherently imprecise and that estimates of more recent reserve discoveries are more imprecise than those for properties with long production histories. Actual results could materially differ from these estimates.

Cash and Cash Equivalents

The Company considers short-term investments with an original maturity of less than three months to be cash equivalents.

Allowance for Doubtful Accounts

The Company establishes provisions for losses on accounts receivable if it determines that it will not collect all or part of the outstanding balance. The Company regularly reviews collectibility and establishes or adjusts the allowance as necessary using the specific identification method. There is no significant allowance for doubtful accounts at December 31, 2005 and December 31, 2004.

Oil and Gas Properties

The Company accounts for its oil and gas producing activities using the full cost method of accounting as prescribed by the Securities and Exchange Commission (SEC). Accordingly, all costs incurred in the acquisition, exploration, and development of proved oil and gas properties, including the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized. All general corporate costs are expensed as incurred. Sales or other dispositions of oil and gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded unless the ratio of cost to proved reserves would significantly change. Depletion of evaluated oil and gas properties is computed on the units of production method based on proved reserves. The net capitalized costs of proved oil and gas properties are subject to a full cost ceiling limitation in which the costs are not allowed to exceed their related estimated future net revenues discounted at 10%, net of tax considerations.

Costs associated with unevaluated properties are excluded from the full cost pool until we have made a determination as to the existence of proved reserves. We review our unevaluated properties at the end of each quarter to determine whether the costs incurred should be classified to the full cost pool and thereby subject to amortization.

52

Property, Plant and Equipment Other than Oil and Gas Properties

Other operating property and equipment are stated at the lower of cost or fair market value. Provision for depreciation and amortization on property and equipment is calculated using the straight-line method over the estimated useful lives (ranging from 3 to 10 years) of the respective assets. The cost of normal maintenance and repairs is charged to operating expense as incurred. Material expenditures, which increase the life of an asset, are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of properties sold, or otherwise disposed of, and the related accumulated depreciation or amortization are removed from the accounts and any gains or losses are reflected in current operations.

Impairment of Long-Lived Assets

In the event that facts and circumstances indicate that the costs of long-lived assets, other than oil and gas properties, may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value is required. Impairment of oil and gas properties is evaluated subject to the full cost ceiling as described under the Oil and Gas Properties section above.

Revenue Recognition

The Company recognizes oil and gas sales upon delivery to the purchaser. Under the sales method, the Company and other joint owners may sell more or less than their entitled share of the natural gas volume produced. Should the Company’s excess sales of natural gas exceed its share of estimated remaining recoverable reserves, a liability is recorded by the Company and revenue is deferred.

Concentrations of Credit Risk

The Company operates a substantial portion of its oil and gas properties. As the operator of a property, the Company makes full payments for costs associated with the property and seeks reimbursement from the other working interest owners in the property for their share of those costs. The Company’s joint interest partners consist primarily of independent oil and gas producers. If the oil and gas exploration and production industry in general were adversely affected, the ability of the Company’s joint interest partners to reimburse the Company could be adversely affected.

The purchasers of the Company’s oil and gas production consist primarily of independent marketers, major oil and gas companies and gas pipeline companies. The Company has not experienced any significant losses from uncollectible accounts. In 2005, the Company had one individual purchaser that accounted for approximately 12% of the Company’s total sales. In 2004, the Company had no individual customers accounting for more than 10% of total sales. In 2003, approximately 53% of the Company’s total sales were made to three individual customers. The Company does not believe the loss of any one of its purchasers would materially affect the Company’s ability to sell the oil and gas it produces. The Company believes other purchasers are available in the Company’s areas of operations.

Price Risk Management Activities

On January 1, 2001, the Company adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133 and as amended by SFAS No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities. From time to time, the Company may hedge a portion of its forecasted oil and gas production. Derivative contracts entered into by the Company have consisted of cash flow hedge transactions in which the Company hedges the variability of cash flow related to a forecasted transaction. As of December 31, 2005 and 2004, and for the years then ended, the Company has elected to not designate any of its positions for hedge accounting. Accordingly, all derivatives are recorded in current earnings as a component of other income and expenses on the statement of operations. In 2003 the Company designated derivatives as cash flow hedges and applied hedge accounting.

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Income Taxes

The Company accounts for income taxes using the asset and liability method wherein deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Asset Retirement Obligation

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS 143). The Company was required to adopt this new standard beginning January 1, 2003. SFAS 143 requires that the fair value of an asset retirement cost, and corresponding liability, should be recorded as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. Upon adoption, the Company recorded an asset retirement obligation to reflect the Company’s legal obligations related to future plugging and abandonment of its oil and gas wells. The Company estimated the expected cash flow associated with the obligation and discounted the amount using a credit-adjusted, risk-free interest rate. The transition adjustment resulting from the adoption of SFAS 143 was reported as a cumulative effect of a change in accounting principle. At least annually, the Company reassesses the obligation to determine whether a change in the estimated obligation is necessary. The Company evaluates whether there are indicators that suggest the estimated cash flows underlying the obligation have materially changed. Should those indicators suggest the estimated obligation may have materially changed on an interim basis (quarterly), the Company will accordingly update its assessment. Additional retirement obligations increase the liability associated with new oil and gas wells as these obligations are incurred.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired net of the fair value of liabilities assumed in the acquisition. SFAS 142 requires that intangible assets with indefinite lives, including goodwill, be evaluated on an annual basis for impairment or more frequently if an event occurs or circumstances change could potentially result in an impairment.

The impairment test requires the allocation of goodwill and all other assets and liabilities to reporting units. The reporting unit used for testing will be the entire company. The fair value of the Company is determined and compared to the book value. If the fair value is less than the book value (including goodwill) then goodwill is reduced to its implied fair value and the amount of the write-down is charged to earnings.

The fair value will be based on estimates of future net cash flows from proved reserves and from future exploration for and development of unproved reserves. Downward revisions of estimated reserves or production, increases in estimated future costs or decreases in oil and gas prices could lead to an impairment of all or a portion of goodwill in future periods.

Fair Value of Financial Instruments

The estimated fair values for financial instruments under FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, cash equivalents, accounts receivable and accounts payable approximates their carrying value due to their short-term nature. The estimated fair value of revolving credit facility and the term facility approximates its carrying value because the debt carries interest rates that approximate current market rates. The 9 7/8% notes were trading at $103.25 at year end 2005 and would have a fair value of $128.5 million at December 31, 2005, as compared to the book value of $124.5 million, including the unamortized premium.

We account for our derivative activities under the provisions of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS NOs. 137, 138 and 149. This statement, as amended, establishes accounting and reporting that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at fair value. See Note 7, Derivative and Hedging Activities for more details.

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Stock-Based Compensation

On January 1, 2003, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123) and related interpretations in accounting for its employee and director stock options and applies the fair value based method of accounting to such options. Under SFAS 123, the fair value of each option granted is estimated on the date of grant using a option-pricing model such as the Black-Scholes model. Under SFAS No. 148 Accounting for Stock-Based Compensation – Transition and Disclosure , an amendment to SFAS 123, certain transitional alternatives were available for a voluntary change to the fair value based method of accounting for stock-based employee compensation if adopted in a fiscal year beginning before December 16, 2003. The Company adopted SFAS 123 prospectively, using the fair value recognition method to all employee and director awards granted, modified or settled after January 1, 2003. Prior to the adoption, the Company elected to follow Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its employee stock options. However, as required by SFAS 123, the Company disclosed on a pro forma basis the impact of the fair value accounting for employee stock options. Transactions in equity instruments with non-employees for goods or services have been accounted for using the fair value method as prescribed by SFAS 123.

Since the Company adopted the fair value recognition provisions of SFAS 123 prospectively for all employee awards granted, modified or settled after January 1, 2003, the cost related to stock-based compensation included in the determination of income for the year ended December 31, 2003, is less than that which would have been recognized if the fair value method had been applied to all awards since the original effective date of SFAS 123. Awards granted vest over a period ranging from one to three years; therefore, some grants made before January 1, 2003 vested in later periods and would represent costs in those periods. For the years ended December 31, 2005 and 2004, these costs were accounted for based on the requirements of SFAS 123.

The fair value of each option grant is calculated on the date of grant using the Black-Scholes option pricing model. The following table illustrates the approximated pro forma effect on net income (loss) and earnings (loss) per share as if the fair value based method had been applied to all outstanding and unvested awards in each period (in thousands).

	Years Ended December 31,
	2004			2003
Net income (loss) applicable to common shareholders as reported	$	7,672		$	521
Add: Stock-based compensation expense included in reported net income (loss), net of tax		2,201			252
Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of tax		(2,330	)		(407	)
Pro forma net income (loss) applicable to common shareholders	$	7,543		$	366
Income (loss) per share:
Basic – as reported	$	0.71		$	0.08
Basic – pro forma	$	0.70		$	0.06
Diluted – as reported	$	0.36		$	0.08
Diluted – pro forma	$	0.35		$	0.06

There were no costs accounted for under APB 25 during the year ended December 31, 2005.

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The assumptions used in calculating the fair value of the Company’s stock-based compensation is disclosed in the following table:

	Years Ended December 31,
	2005			2004			2003
Weighted average value per option granted during the period (1)	$	2.31		$	3.77		$	1.43
Assumptions (2):
Stock price volatility		29.3	%		73.9	%		61.3	%
Risk free rate of return		3.6	%		3.0	%		3.2	%
Expected term	3 years			3 years			5 years

(1)	For purposes of estimating the fair value of options on their date of grant, the Company used the Black-Scholes option pricing model.
(2)	The Company does not pay dividends on its common stock.

Earnings per Share

Basic EPS is calculated by dividing the income or loss available (or attributable) to common shareholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

401(k) Plan

The Company sponsors a 401(k) tax deferred savings plan, whereby the Company matches a portion of employees’ contributions in cash. Participation in the plan is voluntary and all regular employees of the Company are eligible to participate. The Company charged to expense plan contributions of $0.7 million in 2005, $0.3 million in 2004 and less than $0.1 million in 2003. The Company began matching employee contributions dollar-for-dollar on the first 10% in September 2004. Prior contributions were matched dollar-for-dollar on the first 3% of an employee’s pretax earnings.

Recently Issued Accounting Pronouncements

In March 2005, the FASB issued FASB Interpretation (FIN) No. 47 (FIN 47), Accounting for Conditional Asset Retirement Obligations. This Interpretation clarifies the definition and treatment of conditional asset retirement obligations as discussed in SFAS 143. A conditional asset retirement obligation is defined as an asset retirement activity in which the timing and/or method of settlement are dependent on future events that may be outside the control of the Company. FIN 47 states that a Company must record a liability when incurred for conditional asset retirement obligations if the fair value of the obligation is reasonably estimable. This Interpretation is intended to provide more information about long-lived assets, future cash outflows for these obligations and more consistent recognition of these liabilities. FIN 47 is effective for fiscal years ending after December 15, 2005. The adoption of this Interpretation did not materially impact the Company’s operating results, financial position or cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)). SFAS 123(R) is a revision of SFAS No. 123, Accounting for Stock Based Compensation (SFAS 123), and supersedes APB 25, Accounting for Stock Issued to Employees. Among other items, SFAS 123(R) eliminates the use of APB 25 and the intrinsic value method of accounting and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those awards in their financial statements. The Company currently utilizes the Black-Scholes option pricing model to measure the fair value of stock options granted and plans to continue to use that model upon adoption of SFAS 123(R). The Company is in the process of finalizing the adoption of SFAS 123(R) and does not expect it to materially impact the Company’s future operating results.

In March 2005, the SEC issued SAB 107 on SFAS No. 123(R) (SAB 107). SAB 107 reinforces the flexibility allowed by SFAS 123(R) to choose an option pricing model, provides guidance on when it would be appropriate to rely exclusively on either historical or implied volatility in estimating expected volatility and provided examples and simplified approaches to determining the expected term. In April 2005, the SEC extended the date by which companies are required to adopt SFAS 123(R) from the first reporting period beginning on or after June 15, 2005 to the first reporting period of the first fiscal year beginning on or after June 15, 2005.

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2. ACQUISITIONS AND DIVESTITURES

Mission Resources Corporation

On April 4, 2005, the Company, and Mission Resources Corporation (Mission), a Delaware corporation, announced the execution of an Agreement and Plan of Merger, dated as of April 3, 2005, as amended through June 8, 2005, (the Merger Agreement) pursuant to which Mission agreed to merge with and into the Company in a two-step merger transaction. This transaction was consummated on July 28, 2005 when Petrohawk Acquisition Corporation, the Company’s wholly owned subsidiary, merged with and into Mission, and Mission was subsequently merged with and into the Company (the two mergers, collectively the Merger), pursuant to the Merger Agreement. A copy of the Merger Agreement has been filed as Annex A to the Company’s Registration Statement on Form S-4/A with the Securities and Exchange Commission on June 22, 2005. This transaction was consistent with management’s goals of acquiring properties within the Company’s core operating areas that have a significant proved reserve component and which management believes have additional development and exploration opportunities.

Total consideration for the shares of Mission common stock was comprised of 60.1% Company common stock and 39.9% cash. Accordingly, consideration paid to Mission stockholders in the Merger consisted of approximately $139.5 million in cash and approximately 19.565 million shares of the Company’s common stock. In addition, all outstanding options to purchase Mission common stock were converted into options to purchase Petrohawk common stock using the exchange ratio of 0.7641 shares of Petrohawk common stock per share of Mission common stock underlying each option. The Company assumed Mission’s long-term debt of approximately $184 million.

The Merger was accounted for using the purchase method of accounting under the accounting standards established in SFAS No. 141, Business Combinations and No. 142, Goodwill and Other Intangible Assets (SFAS 142). As a result, the assets and liabilities of Mission were included in the Company’s September 30, 2005 consolidated balance sheet. The Company reflected the results of operations of Mission beginning July 28, 2005. The Company recorded the estimated fair values of the assets acquired and liabilities assumed at July 28, 2005, which primarily consisted of oil and gas properties of $606.7 million, derivative liabilities of $29.4 million, asset retirement obligations of $37.7 million, a net deferred tax liability of $134.8 million, and goodwill of $138.9 million. The deferred tax liability recognizes the difference between the historical tax basis of Mission’s assets and the acquisition cost recorded for book purposes. The recorded book value of the oil and gas properties was increased and goodwill was recorded to recognize this tax basis differential. The purchase price allocation is preliminary and subject to change as additional information becomes available. Management does not expect to make any material changes to the original purchase price allocation.

Wynn-Crosby Transaction

On November 23, 2004, the Company acquired Wynn-Crosby Energy, Inc. and eight of the limited partnerships it managed for a purchase price of approximately $425 million after closing adjustments (the Acquisition or Wynn-Crosby). The transaction was funded with proceeds from a $200 million private equity placement, $210 million in borrowings from its commercial bank group, and cash.

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Pro Forma for Mission Resources and Wynn-Crosby

The Company’s unaudited pro forma results are presented below for the years ended December 31, 2005 and 2004. The unaudited pro forma results have been prepared to illustrate the approximated pro forma effects on the Company’s results of operations under the purchase method of accounting as if the Company had acquired Mission Resources Corporation and Wynn-Crosby, Inc. on January 1, 2004. The unaudited pro forma results do not purport to represent what the results of operations would actually have been if the acquisition had in fact occurred on such date or to project the Company’s results of operations for any future date or period.

	Years Ended December 31,
	2005			2004
	(Unaudited)			(Unaudited)
	(In thousands)
Pro forma:
Oil and gas sales	$	359,261		$	275,351
Net (loss) income available to common stockholders		(18,796	)		16,865
Basic earnings per share	$	(0.31	)	$	0.54
Diluted earnings per share	$	(0.31	)	$	0.36

Proton Oil & Gas Corporation

On February 25, 2005, the Company acquired the stock of Proton Oil & Gas Corporation (Proton) for $53 million in cash. This privately negotiated transaction had an effective date of January 1, 2005. The properties acquired were located in South Louisiana and South Texas.

The acquisition of Proton was accounted for using the purchase method of accounting. As a result, the assets and liabilities of Proton were included in the Company’s March 31, 2005 consolidated balance sheet. The transaction had an effective date of January 1, 2005 and closed on February 25, 2005. As such, the Company reflected the results of operations of Proton beginning February 25, 2005. The Company recorded a purchase price of approximately $80.4 million of which $26.0 million reflected a non-cash item pertaining to the deferred income taxes attributable to the differences between the tax basis and the fair value of the acquired oil and gas properties. Substantially all of the $80.4 million was allocated to oil and gas properties. The purchase price allocation is preliminary and subject to change as additional information becomes available. Management does not expect to make any material changes to the original purchase price.

Sale of Royalty Interest Properties

On February 25, 2005, the Company completed the disposition of certain royalty interest properties previously acquired from Wynn-Crosby Energy, Inc. to Noble Royalties, Inc. (Noble) d/b/a Brown Drake Royalties for approximately $80 million in cash. The transaction had an effective date of January 1, 2005.

PHAWK, LLC Transaction

On August 11, 2004, the Company acquired from PHAWK, LLC (formerly known as Petrohawk Energy, LLC) (PHAWK) certain oil and gas properties in the Breton Sound area, Plaquemines Parish, Louisiana and in the West Broussard field in Lafayette Parish, Louisiana. The purchase price for all of the proved reserves, seismic data, undeveloped acreage, pipelines, production facility and other assets was $8.5 million. The effective date of the acquisition was June 1, 2004 and the effects of this transaction were first reported in results for the quarter ended September 30, 2004. Refer to Note 10, Related Party Transactions, for more details.

Recapitalization by PHAWK, LLC

On May 25, 2004, PHAWK, LLC, which is owned by affiliates of EnCap Investments, L.P., Liberty Energy Holdings LLC, Floyd C. Wilson and other members of the Company’s management, recapitalized the Company with $60 million in cash. The $60 million investment was structured as the purchase by PHAWK of 7.576 million new shares of common stock for $25 million, a $35 million five year 8% subordinated note convertible into approximately 8.75 million shares of

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common stock at a conversion price of $4.00 per share and warrants to purchase 5.0 million shares of common stock at a price of $3.30 per share. At the annual stockholders meeting held July 15, 2004, the stockholders approved changing the name of the Company to Petrohawk Energy Corporation (from Beta Oil & Gas, Inc.), reincorporating the Company in Delaware, and the adoption of new incentive plans. On June 30, 2005, the Company entered into an agreement with PHAWK, LLC to convert the PHAWK Note to common stock as stipulated in the original agreement. Refer to Note 10, Related Party Transactions, for more details.

3. OIL AND GAS PROPERTIES

Oil and gas properties as of December 31, 2005 and 2004 consisted of the following:

	December 31,
	2005			2004
	(in thousands)
Subjection to depletion	$	1,096,810		$	484,233
Not subject to depletion:
Exploration wells in progress		14,006			161
Other capital costs:
Incurred in 2005		113,215			—
Incurred in 2004 and prior		34,912			48,679
Total not subject to depletion		162,133			48,840
Gross oil and gas properties		1,258,943			533,073
Less accumulated depletion		(121,456	)		(48,740	)
Net oil and gas properties	$	1,137,487		$	484,333

4. LONG-TERM DEBT

Long-term debt as of December 31, 2005 and 2004 consisted of the following:

	December 31,
	2005		2004
	(in thousands)
Senior revolving credit facility	$	210,000	$	155,000
Second lien term loan facility (1)		148,500		49,500
9 7/8% senior notes (2)		134,484		—
Subordinated convertible note payable (3)		—		35,000
Deferred premiums on derivatives (4)		2,817		—
	$	495,801	$	239,500

(1)	The Company’s second lien term loan facility was amended July 28, 2005 to increase the amount the Company was permitted to borrow from $50 million to $150 million. $1.5 million of the total $150 million facility has been classified as current on the December 31, 2005 balance sheet and $0.5 million of the $50 million facility was classified as current on the December 31, 2004 balance sheet.
(2)	Amount includes $10.0 million premium recorded by the Company in conjunction with the assumption of $130 million face value of 9 7/8% notes payable from Mission. See Note 2, Acquisitions and Divestitures for more details.
(3)	Converted into 8.75 million shares of common stock on June 30, 2005.
(4)	Amount excludes $1.3 million of deferred premiums on derivatives which has been classified as current on the December 31, 2005 balance sheet.

Senior Revolving Credit Facility

The Company entered into a new senior revolving credit facility with BNP Paribas as the lead bank and administrative agent on November 23, 2004, in connection with the acquisition of Wynn Crosby. The $400 million revolving credit facility had an initial borrowing base of $200 million and a threshold amount of $180 million. On April 1, 2005, the borrowing base under the facility was changed to $185 million with a threshold amount of $175 million.

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In connection with the Merger with Mission, the Company amended and restated its $400 million senior revolving credit agreement (Senior Credit Agreement) dated November 23, 2004. The amended Senior Credit Agreement provides for an increased borrowing base of $260 million that will be redetermined on a semi-annual basis, beginning April 1, 2006, with the Company and the lenders each having the right to one annual interim unscheduled redetermination, and adjusted based on the Company’s oil and gas properties, reserves, other indebtedness and other relevant factors. Upon a redetermination, the Company could be required to repay a portion of the bank debt.

Amounts outstanding under the Senior Credit Agreement bear interest at a specified margin over the London Interbank Offered Rate (LIBOR) of 1.25% to 2.00% for Eurodollar loans or at specified margins over the Alternate Base Rate (ABR) of 0.00% to 0.50% for ABR loans. Such margins will fluctuate based on the utilization of the facility. Borrowings under the Senior Credit Agreement are secured by first priority liens on substantially all of the Company’s assets, including equity interest in the Company’s subsidiaries. Amounts drawn on the facility mature on July 28, 2009.

The Senior Credit Agreement requires the Company to maintain certain financial covenants pertaining to minimum working capital levels, minimum coverage of interest expense, and a maximum leverage ratio. The Company may not permit its ratio of reserves to total debt to be less than 1.5 to 1.0 after March 31, 2005. The Company may not permit its ratio of total debt to EBITDA (as defined in the debt agreement) for the period of four fiscal quarters immediately preceding the date of redetermination for which financial statements are available to be greater than 4.0 to 1.0. In addition, the Company is subject to covenants limiting dividends, and other restricted payments, transactions with affiliates, incurrence of debt, changing of control, asset sales, and liens on properties. At December 31, 2005, the Company is in compliance with all of its debt covenants under the Senior Credit Agreement.

In connection with the acquisition of all of the issued and outstanding common stock of Winwell Resources, Inc. and the acquisition of certain oil and gas assets from Redley Company, the Company amended the Senior Credit Agreement. Refer to Note 12, Subsequent Events, for more details.

Second Lien Term Loan Facility

A second lien facility (Term Loan) in the amount of $50 million was provided by BNP Paribas and a group of lenders which is due on February 25, 2009. Borrowings under the Term Loan will initially bear interest at LIBOR plus 4.00%, increasing 0.25% on a quarterly basis thereafter, subject to a ceiling of LIBOR plus 5.00%. Borrowings under the Term Loan facility are secured by a second priority lien on substantially all of the assets securing the Senior Credit Agreement. The Company is subject to certain financial covenants pertaining to minimum asset coverage ratio and a maximum leverage ratio as discussed above under the revolving credit facility. In addition, the Company is subject to covenants limiting dividends and other restricted payments, transactions with affiliates, incurrence of debt, changes of control, asset sales, and liens on properties.

On July 28, 2005, the Company’s Term Loan was amended to increase the amount that the Company is permitted to borrow thereunder from $50 million to $150 million.

At the closing of the Merger, the Company had drawn $75 million under the Term Loan. By September 30, 2005 the Company had exercised its option to borrow an additional $75 million, applying the proceeds to outstanding borrowings under the Senior Credit Agreement. Amounts repaid under the Term Loan may not be re-borrowed. Amounts outstanding under the Term Loan bear interest at a specified margin over the LIBOR rate of 4.50% for Eurodollar loans or at specified margins over the ABR rate of 3.50% for ABR loans. The Company is obligated to repay 1% per annum of the original principal balance beginning on July 28, 2006, with the remaining 96% of the original principal balance due and payable on July 28, 2010. At December 31, 2005, the Company is in compliance with all of its debt covenants under the Term Loan.

In connection with the acquisition of all of the issued and outstanding common stock of Winwell Resources, Inc. and the acquisition of certain oil and gas assets from Redley Company, the Company amended the Term Loan. Refer to Note 12, Subsequent Events, for more details.

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9 7/8% Senior Notes

On April 8, 2004, Mission issued $130.0 million of its 9 7/8% senior notes due 2011 (the Notes) which are guaranteed on an unsubordinated, unsecured basis by all of its current subsidiaries. Interest on the notes is payable semi-annually, on each April 1 and October 1, commencing on October 1, 2004. In conjunction with the acquisition of Mission, the Company has assumed these notes. Following the effectiveness of the Merger, the Company entered into a supplemental indenture (Indenture) whereby the Company assumed, and subsidiaries guaranteed, all the obligations of Mission under the Notes as set forth in the original indenture between Mission and the Bank of New York dated April 8, 2004.

The Notes were issued in the face amount of $130 million and are guaranteed on an unsubordinated basis by all of the Company’s current subsidiaries. The Notes are subordinate to the Senior Credit Facility and Term Loan. At any time on or after April 9, 2005 and prior to April 9, 2008, the Company may redeem up to 35% of the aggregate principal amount of the Notes, using the net proceeds of equity offerings, at a redemption price equal to 109.875% of the principal amount of the Notes, plus accrued and unpaid interest. On or after April 9, 2008, the Company may redeem all or a portion of the Notes at redemption prices ranging from 100% in 2010 to approximately 105% in 2008. In November 2005, the Company acquired, at market price, $5.5 million face amount of the Notes from an investor. The Company retired those Notes and recognized a gain on extinguishment of debt of approximately $0.1 million.

Upon the effectiveness of the Merger, a Change of Control (as defined in the Indenture) occurred and pursuant to the Indenture, the Company was obligated to make a Change of Control Offer (as defined in the Indenture) within 30 days after the change of control. The offer price is 101% of the aggregate principal amount of the Notes, plus accrued and unpaid interest and must be made to all noteholders. The offer has expired, with one noteholder with a $10,000 principal balance Note accepting the Company’s offer.

As discussed above, on or after April 9, 2008, the Company may redeem all or a portion of the 9 7/8% Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if redeemed during the twelve-month period beginning on April 9 of the years indicated below:

Year	Percentage
2008		104.94	%
2009		102.47	%
2010		100.00	%

The purchase method of accounting for the Merger required that the Company record the assets and liabilities acquired at fair value. The Notes were trading at a premium on the merger date, therefore, a $11.1 million premium on the Notes was recorded to reflect the merger date fair value of the Notes on Petrohawk’s balance sheet. The premium will be amortized over the life of the Notes using the effective interest method. The amortization resulted in a $0.6 million reduction of interest expense for the year ended December 31, 2005. Future amortization will result in a reduction of interest expense.

The Notes contain covenants that, subject to certain exceptions and qualifications, limit the Company’s ability and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness, issue certain types of equity securities, transfer or sale assets, or pay dividends. Additionally, transactions with affiliates, selling stock of a subsidiary, merging or consolidating are subject to qualifications.

Subordinated Convertible Note Payable

On May 25, 2004, in connection with the recapitalization of the Company by PHAWK, LLC, the Company issued a $35 million five-year unsecured subordinated convertible note payable to PHAWK, LLC (the PHAWK Note). The PHAWK Note bore interest at 8%, was payable quarterly until maturity and was convertible after two years into 8.75 million shares of common stock at a conversion price of $4.00 per share. On June 30, 2005, the Company entered into an agreement with PHAWK, LLC to convert the PHAWK Note to common stock as stipulated in the original agreement. The original agreement contained a provision providing for conversion into 8.75 million shares of Petrohawk common stock at any time after May 25, 2006. In conjunction with the early conversion, the Company made payment of $2.4 million, which represented the interest that would have been payable on the PHAWK Note through May 25, 2006, discounted at 10%.

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Aggregate maturities required on long-term debt at December 31, 2005 are due in future years as follows (amounts in thousands):

2006	$	2,788
2007		4,317
2008		1,500
2009		211,500
2010		144,000
Thereafter		124,484
Total	$	488,589

Debt Issuance Costs

The Company capitalizes certain direct costs associated with the issuance of long-term debt.

In conjunction with the acquisition of Mission, the Company modified its Term Loan. This modification increased the Company’s borrowing capacity from $50 million to $150 million and was appropriately treated as an extinguishment of debt for accounting purposes. This treatment resulted in a charge of approximately $2.9 million in the third quarter of 2005. This charge is included in the interest expense and other line of the consolidated statement of operations.

During the second quarter of 2005, in conjunction with the conversion of the PHAWK Note, the Company expensed $1.1 million of net debt issuance costs that were being amortized over the remaining life of the note. This amount is included in interest expense and other on the consolidated statement of operations.

At December 31, 2005, the Company has approximately $2.0 million of net debt issuance costs that are being amortized over the lives of the respective debt.

5. ASSET RETIREMENT OBLIGATION

If a reasonable estimate of the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells can be made, the Company records a liability (an asset retirement obligation or ARO) on the consolidated balance sheet and capitalizes the asset retirement cost in oil and gas properties in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for the company. After recording these amounts, the ARO is accreted to its future estimated value using the same assumed cost of funds and the additional capitalized costs are depreciated on a unit-of-production basis.

The Company recorded the following activity related to the ARO liability for the years ended December 31, 2005 and 2004 (in thousands):

Beginning balance as of January 1, 2004	$	1,235
Liabilities settled and divested		(12	)
Additions		541
Acquisition of Wynn-Crosby (1)		10,825
Accretion expense		137
Liability for asset retirement obligation as of December 31, 2004	$	12,726
Beginning balance	$	12,726
Liabilities settled and divested		(1,562	)
Additions		455
Acquisition of Mission and Proton(1)		38,473
Accretion expense		1,157
Liability for asset retirement obligation as of December 31, 2005	$	51,249

⁽¹⁾ Refer to Note 2 Acquisitions and Divestitures for more details on these acquisitions.

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The Company currently plans to plug approximately 40 gross wells in 2006. Accordingly, the Company has classified $1.1 million of the overall $51.2 million liability as a current liability in accounts payable and accrued liabilities at December 31, 2005.

6. COMMITMENTS, CONTINGENCIES AND LITIGATION

Contingencies

The Company is a defendant in various legal proceedings arising in the normal course of our business. All known liabilities are accrued based on management’s best estimate of the potential loss. While the outcome and impact of such legal proceedings on the Company cannot be predicted with certainty, the Company’s management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on the Company’s consolidated financial position or cash flow.

A lawsuit has been filed by Andrew A. Roth (Mr. Roth) against the Company, as a nominal defendant, certain of our directors and certain of our current and former stockholders, including PHAWK, LLC, alleging violations of Section 16(b) of the Exchange Act of 1934, as amended. The lawsuit seeks recovery, on behalf of the Company, of alleged short-swing profits of at least $6,465,000. Mr. Roth filed the lawsuit in the United States District Court for the Southern District of New York on October 31, 2005 as Andrew A. Roth derivatively on behalf of Petrohawk Energy Corporation v. PHAWK, LLC, et. al., and the case was assigned Civil Case Number: 05 CV 9247. Pursuant to an August 1, 2005 demand letter from Mr. Roth, an independent committee of the board of directors of the Company investigated Mr. Roth’s claims prior to the filing of the lawsuit and concluded they had no merit. The Company is monitoring developments in the matter with legal counsel. The Company does not believe this litigation shall have a material effect on the Company’s financial position or results of operations, should the plaintiff’s allegations be found to be accurate.

The Company has established reserves for certain legal proceedings. The establishment of a reserve involves an estimation process that includes the advice of legal counsel and subjective judgment of management. Management believes these reserves to be adequate, and does not expect the Company to incur additional losses with respect to those matters in which reserves have been established. However, future changes in the facts and circumstances could result in the actual liability exceeding the estimated ranges of loss and amounts accrued. While the outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on the consolidated results of operations, financial position or cash flows of the Company.

Prior to the acquisition of Mission Resources (“Mission”) by Petrohawk, Mission entered into agreements with a surety company and other third parties. All parties involved agreed to be jointly and severally liable to the surety company for certain liabilities arising under the agreement and limited to approximately $35 million. As of December 31, 2005 there have been no payments made as a result of this agreement.

Lease Commitments

The Company leases corporate office space in Houston, Texas, certain vehicles, machinery and equipment under long-term operating leases. Rent expense was $0.7 million, $0.3 million, and $0.2 million for the years ended December 31, 2005, 2004, and 2003, respectively. Future minimum lease payments for all non-cancelable operating leases are as follows (in thousands):

2006	$	2,196
2007		1,554
2008		1,336
2009		632
2010		122
Thereafter		—
Total	$	5,840

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7. DERIVATIVE AND HEDGING ACTIVITIES

Periodically, the Company enters into derivative commodity instruments to hedge its exposure to price fluctuations on oil and gas production. Under collar arrangements, if the index price rises above the ceiling price, the Company pays the counterparty. If the index price falls below the floor price, the counterparty pays the Company. Under price swaps, the Company receives a fixed price on a notional quantity of oil and gas in exchange for paying a variable price based on a market-based index, such as NYMEX oil and gas futures.

At December 31, 2005, the Company had 48 open positions: 20 natural gas price collar arrangements, one natural gas price swap arrangement, four natural gas put options, one crude oil price swap arrangement and 22 crude oil collar arrangements. The Company elected not to designate any positions as cash flow hedges for accounting purposes, and accordingly, recorded the net change in the mark-to-market valuation of these derivative contracts in the consolidated statement of operations.

At December 31, 2005, the Company had a $3.5 million derivative asset, $1.3 million of which is classified as current, and an $86.8 million derivative liability, $51.1 million of which is classified as current. The weighted average of the forward strip prices used to value the derivative liability were $63.14 per barrel of oil and $10.41 per mcf of natural gas. On the July 28, 2005 merger date, the Company acquired a $29.4 million derivative liability from Mission. At December 31, 2005, the fair value of the derivatives acquired from Mission was $22.7 million.

The Company recorded a net derivative loss of $100.4 million for the year ended December 31, 2005.

At December 31, 2004, the Company had 90 open positions: 35 natural gas price collar arrangements, 12 natural gas price swap arrangements, seven natural gas put options, nine crude oil price swap arrangements and 27 crude oil collar arrangements. During 2004, the Company elected not to designate any positions as cash flow hedges for accounting purposes, and accordingly, recorded the change in mark-to-market valuation of these derivative contracts in the consolidated statement of operations.

At December 31, 2004, the Company had an $8.3 million derivative receivable and a $2.1 million derivative liability. In addition, the Company recorded a net derivative gain of $7.4 million for the year ended December 31, 2004.

For the year ended December 31, 2003, the Company designated its derivative positions as hedges against the variability in cash flows associated with the forecasted sale of future oil and gas accounted for under the guidelines stipulated by SFAS 133. At December 31, 2003, the Company had no open positions but recognized a net $0.6 million loss on derivative contracts for the year ended December 31, 2003.

Natural Gas

At December 31, 2005, the Company had the following natural gas costless collar positions:

			Contract Price per Mmbtu
			Collars
			Floors				Ceilings
	Volume in		Price /		Weighted		Price /		Weighted
Period	Mmbtu’s		Price Range		Average Price		Price Range		Average Price
January 2006 - December 2006		15,175,000	$	5.00-$6.26	$	5.79	$	7.08-$10.87	$	9.05
January 2007 - December 2007		6,530,000		5.30 - 6.00		5.69		7.12 - 15.35		11.72
January 2008 - December 2008		3,600,000		5.00 - 5.15		5.05		6.45 - 6.71		6.53

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     At December 31, 2005, the Company had the following natural gas swap position:

Contract Price per Mmbtu
Swaps
	Volume in	Weighted
Period	Mmbtu’s	Average Price
January 2007 — December 2007	1,200,000	$6.06

At December 31, 2005, the Company had the following natural gas put options:

Contract Price per Mmbtu
Floors
	Volume in	Weighted
Period	Mmbtu’s	Average Price
January 2006 — December 2006	5,400,000	$8.00
January 2007 — December 2007	3,600,000	8.00

During the fourth quarter of 2005, the Company entered into three natural gas put option contracts covering 5,400,000 Mmbtus of anticipated production in 2006 and one natural gas put option contract covering 3,600,000 Mmbtus of anticipated production in 2007. These natural gas put option contracts contain deferred premiums that will be paid as the contracts expire. The Company has recorded a deferred premium liability of $4.1 million of long term debt (of which $1.3 million has been recorded as a current portion of long term debt) as of December 31, 2005 based on a weighted average deferred premium of $0.24 per Mmbtu in 2006 and $0.78 per Mmbtu in 2007.

Crude Oil

At December 31, 2005, the Company had the following crude oil costless collar positions:

			Contract Price per Bbl
			Collars
			Floors				Ceilings
	Volume in		Price /		Weighted		Price /		Weighted
Period	Bbls		Price Range		Average Price		Price Range		Average Price
January 2006 - December 2006		1,338,750	$	26.03-$45.48	$	38.17	$	30.15-$62.70	$	50.78
January 2007 - December 2007		240,000		35.00 - 36.00		35.30		43.20 - 45.75		43.97
January 2008 - December 2008		60,000		34.00		34.00		45.30		45.30

At December 31, 2005, the Company had the following crude oil swap position:

Contract Price per Bbl
Swaps
	Volume in	Weighted
Period	Bbls	Average Price
January 2008 — December 2008	144,000	$38.10

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8. STOCKHOLDERS’ EQUITY

In conjunction with the Merger with Mission Resources, the Company filed two Registration Statements on Form S-8 and one Registration Statement on Form S-4. The first Registration Statement on Form S-8 was filed to register an additional 3.5 million shares of the Company’s common stock under stock options granted pursuant to the Second Amended and Restated 2004 Employee Incentive Plan and an additional 0.2 million shares of the Company’s common stock pursuant to the Second Amended and Restated 2004 Non-Employee Director Incentive Plan. The second Registration Statement on Form S-8 was filed to register approximately 3.85 million shares of common stock of the Company for issuance pursuant to employee benefit plans and nonstatutory stock option agreements of Mission which the Company agreed to assume under the term of the Merger Agreement. The Company also increased its authorized number of common shares to 125 million from 75 million. The Company registered 19.565 million shares of common stock on the Form S-4 and those shares were issued as merger consideration to holders of Mission stock.

8% Cumulative Convertible Preferred Stock

On June 29, 2001 the Company completed its Private Placement Offering of 8% cumulative convertible preferred stock and common stock purchase warrants, offered as units of one preferred share and one-half of one warrant at $9.25 per unit. Net proceeds received from the offering were approximately $5.0 million net of estimated offering expenses, including brokers’ commissions and other fees and expenses of $0.5 million. The Company issued 604,271 preferred shares and 151,070 warrants to purchase a like number of shares of the Company’s common stock at a price equal to the offering price or $9.25 per share. Brokers were issued 29,888 non-callable warrants as part of their commission. All investors participating in the offering were accredited. The proceeds were used by the Company to help meet its capital requirements, including drilling costs and for other general corporate purposes.

The preferred shares may be converted by the holder at any time at an exchange rate of one share of the Company’s common stock for each two preferred shares converted.

The preferred shares pay quarterly cash dividends commencing in the quarter that the preferred shares are issued, at an annual rate of 8% per annum, simple interest, or $0.74 per year. At December 31, 2005, the Company had $0.1 million of preferred dividends declared, which were not paid until January, 2006.

The Company has the unilateral right to redeem all or any of the outstanding preferred shares from the date of issuance but must pay a premium if redeemed within the first five years. The holders of the preferred shares will be entitled to a liquidation preference equal to the stated value of the preferred shares plus any unpaid and accrued dividends through the date of any liquidation or dissolution of the Company.

In July of 2004 and August of 2005, the Company acquired and canceled 6,000 and 5,000 shares, respectively, of the outstanding 8% cumulative convertible preferred stock.

At December 31, 2005, the liquidation preference was approximately $5.5 million. Warrants are non-transferable and may be exercised at any time through June 29, 2006.

Series B Preferred Stock

In connection with the acquisition of Wynn-Crosby on November 23, 2004, the Company issued and sold 2,580,645 shares of Series B 8% Automatically Convertible Preferred Stock for $77.50 per share, for an aggregate offering amount of approximately $200 million. The Company received approximately $185 million in net proceeds from the offering. The Series B preferred stock was offered and sold pursuant to the private placement exception from registration provided in Regulation D, Rule 506, under Section 4(2) of the Securities Act of 1933, as amended (the Act). Shares of the Series B preferred stock were offered and sold only to qualified institutional buyers as defined in Rule 144A of the Act with whom the placement agent had pre-existing relationships in reliance on applicable exemptions from registration provided under the Act. The placement agent received a commission of 6.0% in connection with the offering.

On December 31, 2004 each outstanding share of the Series B 8% Automatically Convertible Preferred Stock converted into ten shares of common stock. Accordingly, 2,580,645 shares of the Company’s Series B preferred stock converted into 25,806,450 shares of common stock. In addition, the Company’s Certificate of Incorporation was amended to increase the number of authorized shares of common stock from 50,000,000 to 75,000,000 effective December 31, 2004.

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Treasury Stock

At December 31, 2005, the Company held 8,382 treasury shares with an average price per share of $4.35 from prior repurchase programs.

Restricted Stock

During the year ended December 31, 2005, the Company granted 55,000 shares of restricted stock to employees and 45,000 shares to directors. The employees’ shares vest over a three year period at a rate of one-third on the annual anniversary date of the grant, and the directors’ shares are further described below under 2004 Non-Employee Director Incentive Plan. For the year ended December 31, 2005, the Company has recognized $0.8 million of non-cash restricted stock compensation expense.

Warrants and Options

The following table summarizes the number of shares reserved for the exercise of common stock purchase warrants and stock options under the Company’s 1999 Amended Incentive and Non-statutory Stock Option Plan (1999 Plan), 2004 Employee Incentive Plan, Mission Resources Corporation 1994 Stock Incentive Plan, Mission Resources Corporation 1996 Stock Incentive Plan and Mission Resources Corporation 2004 Stock Incentive Plan as of December 31, 2005:

				Weighted Average
	Number of			Exercise Price
	Shares			Per Share
Balance at January 1, 2004		1,716,542		$	10.11
Granted		5,717,500			3.83
Forfeited or cancelled		(254,867	)		11.90
Exercised		(178,292	)		3.51
Balance at December 31, 2004		7,000,883		$	5.08
Granted		1,404,300		$	9.37
Forfeited or cancelled		(572,434	)		15.01
Assumed in Merger with Mission		3,852,433			3.76
Exercised		(5,986,635	)		3.26
Balance at December 31, 2005		5,698,547		$	6.16
Exercisable at December 31, 2004		6,525,224		$	4.91
Exercisable at December 31, 2005		4,417,331		$	5.30

Warrants and options outstanding at December 31, 2005 consisted of the following:

Outstanding Options							Exercisable Options
					Weighted
			Weighted		Average				Weighted
			Average		Remaining				Average
Range of Exercise	Number of		Exercise Price		Contractual		Number of		Exercise Price
Prices Per Share	Options		per share		Life (Years)		Options		per share
$ 0.50 —   3.80		2,965,027	$	3.23		3.7		2,965,027	$	3.23
4.34 —   6.18		151,914		5.70		7.8		151,914		5.70
7.32 — 11.78		2,298,791		8.69		8.3		1,072,325		8.30
12.00 — 19.00		282,815		16.83		2.3		228,065		17.81

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During the second quarter of 2004, and in connection with the recapitalization of the Company by PHAWK, LLC transaction, the Company issued PHAWK, LLC 5,000,000 five-year common stock purchase warrants at a price of $3.30 per share. The warrants are exercisable at any time and expire on May 25, 2009. On August 31, 2005, 2.3 million warrants were exercised. The exercise was cashless, reducing number of shares issued by the value of the $3.30 exercise price, so that the Company issued 1,645,241 shares of company stock. On July 8, 2005, shares and warrants held by PHAWK, LLC were distributed to its members, including our management.

Incentive Plans

2004 Employee Incentive Plan

Upon shareholder approval and effective July 28, 2005, the Company’s Amended and Restated 2004 Employee Incentive Plan was amended and restated to be the Second Amended and Restated 2004 Employee Incentive Plan (the 2004 Plan) to increase the aggregate number of shares that can be issued under the 2004 Plan from 2,750,000 to 4,250,000. The 2004 Plan permits the Company to grant to management and other employees shares of common stock with no restrictions, shares of common stock with restrictions, and options to purchase shares of common stock.

In 2004, the Company granted stock options out of the 2004 Plan covering 717,500 shares of common stock to employees of the Company. The options will vest over a two-year period with one-third vesting on the date of grant, one-third in one year from the date of the grant and the remaining one-third in two years from the date of the grant. The options have an average exercise price of $7.53 per share and will expire ten years from the date of grant.

During fiscal 2005, the Company granted stock options covering 1,404,300 shares of common stock. The options have an average exercise price of $9.37 per share and vest over a three year period at a rate of one-third on the annual anniversary date of the grant. The options expire ten years from the grant date.

For the years ended December 31, 2005, 2004 and 2003, respectively, the Company has recognized $3.8 million, $3.5 million and $0.3 million of non-cash stock compensation expense.

At December 31, 2005, 2,094,050 options were available under the Plan for future issuance.

2004 Non-Employee Director Incentive Plan

In July 2004 the Company adopted the 2004 Non-Employee Director Incentive Plan covering 200,000 shares. The plan provides for the grant of both incentive stock options and restricted shares of the Company’s stock. This plan was designed to attract and retain the services of directors. At the adoption of the plan each non-employee director received 7,500 restricted shares of the Company’s common stock. Under this plan each new non-employee director will receive 7,500 shares of the Company’s common stock. Additional grants of 5,000 restricted shares of the Company’s common stock are expected to be issued to each non-employee director on each anniversary of his or her service. These shares vest over a six month period from the date of grant. For each of the years-ended December 31, 2005 and 2004, 45,000 shares were issued under this plan and there had been no forfeited or cancelled shares.

1999 Employee Incentive Plan

At December 31, 2005, 222,500 options from the original 1999 Employee Incentive Plan were fully vested and exercisable at a weighted average price of $4.11 per share. At December 31, 2005, there were no options available under the Plan for future issuance.

Mission Incentive Plans

In conjunction with the Merger on July 28, 2005, the Company assumed three incentive plans related to Mission Resources. The three plans were the Mission Resources Corporation 1994 Stock Incentive Plan, Mission Resources Corporation 1996 Stock Incentive Plan and Mission Resources Corporation 2004 Stock Incentive Plan. At December 31, 2005, there were 294,145 options available under the Plans for future issuance.

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9. INCOME TAXES

Income tax benefit (provision) for the indicated periods is comprised of the following:

	For the Years Ended
	December 31,
	2005			2004			2003
	(in thousands)
Current:
Federal	$	(217	)	$	24		$	(24	)
State		(253	)		—			—
	$	(470	)	$	24		$	(24	)
Deferred:
Federal	$	9,088		$	(641	)	$	—
State		445			(512	)		—
	$	9,533		$	(1,153	)	$	—
Total benefit (provision)	$	9,063		$	(1,129	)	$	(24	)

The actual income tax benefit (provision) differs from the expected tax benefit (provision) as computed by applying the U.S. Federal corporate income tax rate of 35% for each period as follows:

	For the Years Ended
	December 31,
	2005			2004			2003
	(in thousands)
Amount of expected tax benefit (provision)	$	8,994		$	(3,144	)	$	(336	)
Non-deductible expenses		(92	)		(23	)		3
State taxes, net		625			(338	)		—
Valuation allowance adjustments		(500	)		2,352			333
Other		36			—			—
Alternative minimum tax		—			24			(24	)
	$	9,063		$	(1,129	)	$	(24	)

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The components of net deferred tax assets and liabilities recognized are as follows:

	December 31,
	2005			2004
	(in thousands)
Deferred tax assets:
Current:
Unrealized hedging transactions	$	18,304		$	—
Deferred current tax asset	$	18,304		$	—
Deferred noncurrent tax assets/(liabilities):
Net operating loss carry-forwards	$	45,825		$	11,338
FAS 123 expense		2,596			1,200
Unrealized hedging transactions		12,294			—
Other operating property- equipment		—			1,121
Other		311			—
Gross deferred noncurrent tax asset		61,026			13,659
Valuation allowance		(500	)		—
Net deferred noncurrent tax asset		60,526			13,659
Deferred tax liability — book-tax differences in property basis		(213,681	)		(10,353	)
Unrealized hedging transactions		—			(2,325	)
Net noncurrent deferred tax asset/(liability)		(213,681	)		(12,678	)
Net long-term deferred tax asset/(liability)	$	(153,155	)	$	981

As of December 31, 2005, the Company had available, to reduce future taxable income, a U.S. federal regular net operating loss (NOL) carryforward of approximately $127.0 million, and a U.S. federal alternative minimum tax NOL carryforward of approximately $90.5 million, which expire in the years 2018 through 2024. Utilization of NOL carryforwards is subject to annual limitations due to stock ownership changes. The tax net operating loss carryforward may be limited by other factors as well. The Company also had various state NOL carryforwards totaling approximately $15.7 million (gross state NOL $38.7 million less $23.0 million valuation allowance due to corporate restructuring activities) at December 31, 2005, with varying lengths of allowable carryforward periods ranging from five to 20 years and can be used to offset future state taxable income. It is expected that these deferred tax benefits will be utilized prior to their expiration.

10. RELATED PARTY TRANSACTIONS

On May 25, 2004, PHAWK, LLC (formerly known as Petrohawk Energy, LLC) (PHAWK), which is owned by affiliates of EnCap Investments, L.P., Liberty Energy Holdings LLC, Floyd C. Wilson and other members of the Company’s management, purchased a controlling interest in the Company for $60 million in cash. The $60 million investment was structured as the purchase by PHAWK of 7.576 million shares of common stock for $25 million, a $35 million five year 8% subordinated note convertible into approximately 8.75 million shares of common stock and warrants to purchase 5 million shares of common stock at a price of $3.30 per share (after giving effect to a one-for-two reverse split of the Company’s common stock implemented in May 2004). In connection with the investment by PHAWK, Mr. Wilson was named Chairman, President and Chief Executive Officer, the Company’s board of directors and other management was changed, and the corporate offices were relocated from Tulsa, Oklahoma to Houston, Texas. Also, at the annual stockholders meeting held July 15, 2004, the Company’s stockholders approved changing the name of the company to Petrohawk Energy Corporation (from Beta Oil & Gas, Inc.), reincorporating the company in Delaware, and the adoption of new stock option plans.

On June 30, 2005, the Company entered into an agreement with PHAWK to convert the Company’s $35 million note payable to PHAWK to common stock as stipulated in the original agreement. The original agreement contained a provision providing for conversion into 8.75 million shares of Petrohawk common stock at any time after May 25, 2006. In consideration of the early conversion, the Company agreed to make a payment of $2.4 million, which represented the interest payable on the note through May 25, 2006, discounted at 10%. In conjunction with the conversion, the Company expensed $1.1 million of net debt issuance costs that were being amortized over the remaining life of the note. These charges are reflected in interest expense and other on the consolidated statement of operations.

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A Special Committee of one disinterested director was formed by the Company’s board of directors to evaluate the transaction. On June 30, 2005, the Special Committee approved the transaction.

On August 11, 2004 the Company purchased working interests in certain oil and gas properties and various other assets from PHAWK for $8.5 million. The effective date of the acquisition was June 1, 2004. Since the Company and PHAWK were under common control, the assets were recorded by the Company at the net book value of PHAWK at the time of the sale. The purchase price exceeded the net book value by approximately $5.6 million. The excess was reflected as a return of capital to PHAWK on the consolidated statement of operations.

A special committee of one disinterested director was formed by the Company’s board of directors to evaluate, negotiate and complete the purchase. The Special Committee hired an independent reservoir engineering firm to provide a reserve evaluation and engaged an independent financial advisor to evaluate the fairness, from a financial point of view, to the Company. The independent financial advisor rendered a fairness opinion to the Special Committee.

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11. NET INCOME (LOSS) PER COMMON SHARE

The following represents the calculation of net income (loss) per common share (in thousands, except per share data):

	Years Ended December 31,
	2005			2004			2003
Basic
Net income (loss)	$	(16,634	)	$	8,117		$	968
Less: preferred dividends		(440	)		(445	)		(447	)
Net income (loss) applicable to common shareholders	$	(17,074	)	$	7,672		$	521
Weighted average number of shares		54,752			10,808			6,216
Basic earnings (loss) per share	$	(0.31	)	$	0.71		$	0.08
Diluted
Net income (loss)	$	(17,074	)	$	7,672		$	521
Plus: preferred dividends		—			445
Plus: Interest on 8% subordinated convertible note payable (net of tax)		—			1,072			—
Net income (loss) applicable to common shareholders	$	(17,074	)	$	9,189		$	521
Weighted average number of shares		54,752			10,808			6,216
Common stock equivalent shares representing shares issuable upon exercise of stock options	Anti-dilutive				327			37
Common stock equivalent shares representing shares issuable upon exercise of warrants	Anti-dilutive				2,826		Anti-dilutive
Common stock equivalent shares representing shares “as-if” conversion of note payable		—			8,750			—
Common stock equivalent shares representing shares “as-if” conversion of preferred shares	Anti-dilutive				2,979		Anti-dilutive
Weighted average number of shares used in calculation of diluted income (loss) per share		54,752			25,690			6,253
Diluted earnings (loss) per share	$	(0.31	)	$	0.36		$	0.08

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The following common stock equivalents were not included in the computation for diluted earnings (loss) per share because their effects would be antidilutive.

	December 31,
Common Stock Equivalents:	2005		2004		2003
Options		2,779		99		647
Warrants		2,919		805		920
“As-if” conversion of:
Preferred stock		294		—		302
		5,992		904		1,869

12. SUBSEQUENT EVENTS

Gulf of Mexico Divestiture

On February 3, 2006, the Company entered into a definitive agreement with Northstar GOM, LLC to sell substantially all of the Company’s Gulf of Mexico properties for $52.5 million in cash. These properties had estimated proved reserves as of December 31, 2005 of approximately 25 Bcfe, are approximately 70% gas, 59% proved developed and 27% operated. Current production is estimated to be approximately 10 Mmcfe/d. The transaction is expected to close by March 31, 2006.

The North Louisiana Acquisitions

On January 27, 2006, the Company completed the acquisition of all of the issued and outstanding common stock of Winwell Resources, Inc. (Winwell) pursuant to a Stock Purchase Agreement with Winwell and all of its shareholders made and entered into as of December 14, 2005 (the Stock Purchase Transaction). The aggregate consideration paid in the Stock Purchase Transaction was approximately $208 million in cash after certain closing adjustments. Also on January 27, 2006, the Company completed its acquisition of assets pursuant to an Asset Purchase Agreement with Redley Company, made and entered into as of December 14, 2005, as amended, (the Asset Purchase Transaction). The aggregate consideration paid in the Asset Purchase Transaction was approximately $86 million in cash after certain closing adjustments. Through the Stock Purchase Transaction and Asset Purchase Transaction, the Company acquired oil and gas properties in the Elm Grove and Caspiana fields in North Louisiana.

The Company believes the properties present a significant, multi-year development opportunity primarily in the Cotton Valley and Hosston formations at depths of 6,500 to 10,000 feet. Successful wells in these fields generally produce for more than thirty years and have low operating costs. As part of the transactions, we assumed contracts for two operated drilling rigs. In addition, there are three to five non-operated drilling rigs working in the fields at any given time.

The Company deposited $15 million in earnest money under the terms of the Stock Purchase Transaction, and $7.5 million under the terms of the Asset Purchase Transaction. The $22.5 million deposit was included in other non-current assets at December 31, 2005. The deposit and any interest earned thereon was applied to the overall purchase price.

In connection with the transactions disclosed above and effective as of January 27, 2006, the Company amended its Amended and Restated Senior Revolving Credit Agreement dated as of July 28, 2005, as amended. Pursuant to the amendment, the maximum credit amounts were increased to $600 million and the borrowing base was increased to $400 million. The execution of the amendment by the lenders also constituted a waiver by the lenders permitting the transactions completed and discussed above and provided for the repurchase of approximately 3.3 million shares of the Company’s common stock from EnCap Investments, L.P. and certain of its affiliates.

Also in connection with the transactions discussed above and effective as of January 27, 2006, the Company amended its Amended and Restated Second Lien Term Loan Agreement dated as of July 28, 2005, as amended. Pursuant to the amendment, the maximum commitment amount thereunder was increased from $200 million to $300 million. Also under the amendment, an incremental commitment in the amount of $75 million which could be borrowed in connection with the transactions discussed above was made available to the Company. The execution of the amendment by the lenders also constituted a waiver by the lenders permitting the transactions discussed above and provided for the EnCap

73

Transaction. All of our subsidiaries are parties to the supplement and amendment documents and have pledged all or substantially all of their assets as collateral for the loans.

In connection with the transactions discussed above, on February 1, 2006, the Company issued and sold 13 million shares of its common stock for $14.50 per share, for an aggregate offering amount of approximately $188.5 million. The Company received approximately $180.8 million in net proceeds from the offering. The shares of common stock were privately placed in the offering and have not been registered under the Securities Act of 1933, as amended (the Act), or any state securities laws and, absent registration or an applicable exemption from such registration, may not be offered or sold in the United States. The common stock was offered and sold pursuant to the private placement exceptions from registration provided by Regulation D, Rule 506, under Section 4(2) of the Act and Regulation S of the Act. Shares of the common stock were offered and sold only to “accredited investors” (as defined in Rule 501(a) of the Act) and non-United States persons pursuant to the offers and sales that occur outside the United States within the meaning of Regulation S under the Act. The placement agents for this offering received a cash fee equal to approximately $7.7 million as compensation for services provided in connection with the offering and to reimburse the placement agents for certain expenses.

Pursuant to a related registration rights agreement by us and for the benefit of the purchasers in the aforementioned private offering, the Company agreed to file and cause to be declared effective by the SEC a registration statement covering resales of shares of the Company’s common stock sold in this offering as promptly as reasonably practical and in any event within 75 days after the closing of the offering. If such registration statement is not filed and declared effective by the SEC on or prior to the date 75 days after the closing of the offering, then for each day following such date, but excluding the date the SEC declares the registration statement effective, the Company shall, for each said day, pay each holder of the Company’s common stock purchased in that offering, as liquidating damages, an aggregate amount equal to $0.0048285 multiplied by the aggregate number of shares held by such holder.

On January 26, 2006, the Company entered into a stock purchase agreement with EnCap Investments, L.P. and certain of its affiliates (collectively EnCap), pursuant to which the Company agreed to repurchase, and EnCap agreed to sell, approximately 3.3 million shares of the Company’s common stock held by EnCap at a price per share equal to the net proceeds per share that the Company received from the private offering. The stock purchase agreement was effective as of January 10, 2006.

74

13. ADDITIONAL FINANCIAL STATEMENT INFORMATION

     Certain balance sheet amounts are comprised of the following:

	December 31,
	2005		2004
	(in thousands)
Accounts receivable
Oil and gas sales	$	48,369	$	20,603
Joint interest accounts		15,954		2,154
Other		3,764		394
	$	68,087	$	23,151
Accounts payable and accrued liabilities
Trade payables	$	16,379	$	5,420
Revenues and royalties payable to others		22,273		6,026
Accrued capital costs		23,610		8,027
Accrued lease operating expenses		5,854		1,250
Other		21,901		3,953
	$	90,017	$	24,676

	Year Ended December 31,
	2005		2004		2003
	(in thousands)
Cash payments:
Interest payments	$	26,507	$	2,766	$	519
Income tax payments		24		—		33
Non-cash items excluded from the statement of cash flows:
Accrued capital expenditures	$	6,005	$	1,915	$	—

On June 30, 2005, the Company entered into an agreement with PHAWK, LLC to convert its $35 million five-year unsecured subordinated convertible note into 8.75 million shares of Petrohawk common stock. See Note 3, Long-term Debt for more details.

In the fourth quarter of 2005, the Company entered into three natural gas put option contracts. These contracts contain deferred premiums of $4.1 million and will be paid as the contracts expire.

75

14. SUPPLEMENTAL GUARANTOR INFORMATION

All subsidiaries of the Company (collectively the Guarantor Subsidiaries) are full and unconditional guarantors and are jointly and severally liable under the indenture of the 9 7/8% Notes. Condensed Consolidating Financial Statements for these Guarantor Subsidiaries are presented in the following tables:

CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2005
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries		Eliminations			Consolidated
Current assets	$	51,771		$	54,210	$	—		$	105,981
Net oil and gas properties and other		68,457			1,072,493		—			1,140,950
Investment in subsidiaries		485,455			—		(485,455	)		—
Goodwill		132,029			—		—			132,029
Deferred taxes		2,367			—		(2,367	)		—
Other noncurrent assets		31,214			—		—			31,214
Total assets	$	771,293		$	1,126,703	$	(487,822	)	$	1,410,174
Current liabilities	$	60,314		$	83,572	$	—		$	143,886
Long-term debt		495,801			—		—			495,801
Deferred taxes		—			155,522		(2,367	)		153,155
Other noncurrent liabilities		62,005			28,869		—			90,874
Intercompany		(373,285	)		373,285		—			—
Stockholders’ equity		526,458			485,455		(485,455	)		526,458
Total liabilities and stockholders’ equity	$	771,293		$	1,126,703	$	(487,822	)	$	1,410,174

CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2004
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries			Eliminations		Consolidated
Current assets	$	14,896		$	21,126		$	—	$	36,022
Net oil and gas properties and other		50,803			435,361			—		486,164
Investment in subsidiaries		(7,308	)		—			7,308		—
Other		10,985			1,028			—		12,013
Total assets	$	69,376		$	457,515		$	7,308	$	534,199
Current liabilities	$	8,222		$	18,944		$	—	$	27,166
Long-term debt		239,500			—			—		239,500
Other noncurrent liabilities		10,208			10,234			—		20,442
Intercompany		(435,645	)		435,645			—		—
Stockholders’ equity		247,091			(7,308	)		7,308		247,091
Total liabilities and stockholders’ equity	$	69,376		$	457,515		$	7,308	$	534,199

76

CONDENSED CONSOLIDATING INCOME STATEMENTS
For the Year Ended December 31, 2005
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries			Eliminations			Consolidated
Oil and gas sales	$	65,052		$	192,987		$	—		$	258,039
Equity in earnings of subsidiaries, net of tax		47,496			—			(47,496	)		—
Operating expenses and other		164,125			119,611			—			283,736
Net income (loss) before income taxes		(51,577	)		73,376			(47,496	)		(25,697	)
Income tax benefit (provision)		34,943			(25,880	)		—			9,063
Net income (loss)	$	(16,634	)	$	47,496		$	(47,496	)	$	(16,634	)

CONDENSED CONSOLIDATING INCOME STATEMENTS
For the Year Ended December 31, 2004
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries			Eliminations			Consolidated
Oil and gas sales	$	7,077		$	26,500		$	—		$	33,577
Equity in earnings of subsidiaries, net of tax		1,679			—			(1,679	)		—
Operating expenses and other		(257	)		24,588			—			24,331
Net income (loss) before income taxes		9,013			1,912			(1,679	)		9,246
Income tax benefit (provision)		(896	)		(233	)		—			(1,129	)
Net income (loss)	$	8,117		$	1,679		$	(1,679	)	$	8,117

CONDENSED CONSOLIDATING INCOME STATEMENTS
For the Year Ended December 31, 2003
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries			Eliminations			Consolidated
Oil and gas sales	$	4,100		$	8,825		$	—		$	12,925
Equity in earnings of subsidiaries, net of tax		659			—			(659	)		—
Operating expenses and other		3,785			8,150			—			11,935
Net income (loss) before income taxes and cumulative effect of accounting change		974			675			(659	)		990
Income tax benefit (provision)		(8	)		(16	)		—			(24	)
Net income (loss) before cumulative effect of accounting change		966			659			(659	)		966
Cumulative effect of accounting change		2			—			—			2
Net income (loss)	$	968		$	659		$	(659	)	$	968

77

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2005
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(16,634	)	$	47,496		$	(47,496	)		(16,634	)
Non-cash adjustments		200,594			(86,217	)		47,496			161,873
Changes in assets and liabilities, net of acquisitions		(152,106	)		142,313			—			(9,793	)
Net cash provided by operating activities		31,854			103,592			—			135,446
Cash flows from investing activities:
Net property, plant & equipment expenditures		453,523			(637,132	)		—			(183,609	)
Other		(22,500	)		—			—			(22,500	)
Net cash used in investing activities		431,023			(637,132	)		—			(206,109	)
Cash flows from financing activities:
Borrowings, net of repayments		95,490			—			—			95,490
Proceeds from exercise of options		12,055			—			—			12,055
Other		(29,631	)		—			—			(29,631	)
Net cash provided by financing activities		77,914			—			—			77,914
Net increase in cash and cash equivalents		540,791			(533,540	)		—			7,251
Cash and cash equivalents at beginning of period		(62,138	)		67,798			—			5,660
Cash and cash equivalents at end of period	$	478,653		$	(465,742	)	$	—		$	12,911

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2004
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	8,117		$	1,679		$	(1,679	)		8,117
Non-cash adjustments		(9,806	)		13,847			1,679			5,720
Changes in operating assets and liabilities, net of acquisitions		(463,829	)		467,935			—			4,106
Net cash provided by operating activities		(465,518	)		483,461			—			17,943
Cash flows from investing activities:
Net property, plant & equipment expenditures		1,558			(401,623	)		—			(400,065	)
Other		(416	)		—			—			(416	)
Net cash used in investing activities		1,142			(401,623	)		—			(400,481	)
Cash flows from financing activities:
Borrowings, net of repayments		399,595			(13,284	)		—			386,311
Proceeds from issuance of common stock and warrants		25,629			—			—			25,629
Offering costs		(15,466	)		—			—			(15,466	)
Other		(10,386	)		—			—			(10,386	)
Net cash provided by financing activities		399,372			(13,284	)		—			386,088
Net increase in cash and cash equivalents		(65,004	)		68,554			—			3,550
Cash and cash equivalents at beginning of period		942			1,168			—			2,110
Cash and cash equivalents at end of period	$	(64,062	)	$	69,722		$	—		$	5,660

78

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2003
(In thousands)

				Guarantor
	Petrohawk			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	968		$	659		$	(659	)		968
Non-cash adjustments		278			4,351			659			5,288
Changes in assets and liabilities, net of acquisitions		2,475			(2,938	)		—			(463	)
Net cash provided by operating activities		3,721			2,072			—			5,793
Cash flows from investing activities:
Net property, plant & equipment expenditures		(3,007	)		(539	)		—			(3,546	)
Other		—			—			—			—
Net cash used in investing activities		(3,007	)		(539	)		—			(3,546	)
Cash flows from financing activities:
Borrowings, net of repayments		—			(364	)		—			(364	)
Offering costs		(245	)		—			—			(245	)
Other		(455	)		—			—			(455	)
Net cash used in financing activities		(700	)		(364	)		—			(1,064	)
Net increase in cash and cash equivalents		14			1,169			—			1,183
Cash and cash equivalents at beginning of period		930			(3	)		—			927
Cash and cash equivalents at end of period	$	944		$	1,166		$	—		$	2,110

79

SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)

Oil and Gas Reserves

Users of this information should be aware that the process of estimating quantities of proved and proved developed oil and gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various reservoirs make these estimates generally less precise than other estimates included in the financial statement disclosures.

Proved reserves represent estimated quantities of natural gas, crude oil and condensate that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions in effect when the estimates were made.

Proved developed reserves are proved reserves expected to be recovered through wells and equipment in place and under operating methods used when the estimates were made.

Estimates of proved reserves at December 31, 2005 and 2003 were prepared by Netherland, Sewell & Associates, Inc., the Company’s independent consulting petroleum engineers. The December 31, 2004 proved reserve estimates were prepared by Netherland Sewell with the exception of 26.2 Bcfe of proved reserves associated with royalty interest properties acquired from Wynn-Crosby and subsequently sold on February 25, 2005 which were not part of Netherland Sewell’s report. All proved reserves are located in the United States of America.

The following table illustrates the Company’s net proved reserves, including changes, and proved developed reserves for the periods indicated, as estimated by Netherland Sewell.

	Proved Reserves
	Oil (MBbls)			Gas (Mmcf)
Proved reserves, January 1, 2003		609			14,668
Extensions and discoveries		415			5,052
Production		(129	)		(1,859	)
Revision of previous estimates		413			4,539
Proved reserves, December 31, 2003		1,308			22,400
Extensions and discoveries		93			3,902
Purchase of minerals in place		8,205			138,835
Production		(244	)		(3,569	)
Revision of previous estimates		339			(690	)
Proved reserves, December 31, 2004		9,701			160,878
Extensions and discoveries		1,409			19,905
Purchase of minerals in place		20,285			111,079
Production		(1,555	)		(20,219	)
Sale of minerals in place		(2,723	)		(12,670	)
Revision of previous estimates		2,115			2,904
Proved reserves, December 31, 2005		29,232			261,877

80

	Proved Developed Reserves
	Oil (Mbls)		Gas (Mmcf)
December 31, 2003		984		19,624
December 31, 2004		8,504		119,733
December 31, 2005		22,398		177,603

Capitalized Costs Relating to Oil and Gas Producing Activities

The following table illustrates the total amount of capitalized costs relating to oil and gas producing activities and the total amount of related accumulated depreciation, depletion and amortization (in thousands).

	December 31,
	2005			2004			2003
Evaluated properties	$	1,098,553		$	485,251		$	80,411
Unevaluated properties		162,133			49,547			1,294
		1,260,686			534,798			81,705
Accumulated depreciation, depletion and amortization		(122,301	)		(49,473	)		(40,353	)
	$	1,138,385		$	485,325		$	41,352

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities

Costs incurred in property acquisition, exploration and development activities were as follows (in thousands):

	Year Ended December 31,
	2005		2004		2003
Property acquisition costs, evaluated	$	562,499	$	387,063	$	809
Property acquisition costs, unevaluated		107,664		50,423		—
Exploration and extension well costs		35,083		5,972		921
Development costs		67,457		5,395		3,341
Asset retirement costs		38,928		11,366		1,219
Total costs	$	811,631	$	460,219	$	6,290

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

The following information has been developed utilizing SFAS 69, Disclosures about Oil and Gas Producing Activities, (SFAS 69) procedures and based on oil and gas reserve and production volumes estimated by the Company’s engineering staff. It can be used for some comparisons, but should not be the only method used to evaluate the Company or its performance. Further, the information in the following table may not represent realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flow be viewed as representative of the current value of the Company.

The Company believes that the following factors should be taken into account when reviewing the following information:

• future costs and selling prices will probably differ from those required to be used in these calculations;

• due to future market conditions and governmental regulations, actual rates of production in future years may vary significantly from the rate of production assumed in the calculations;

• a 10% discount rate may not be reasonable as a measure of the relative risk inherent in realizing future net oil and gas revenues; and

• future net revenues may be subject to different rates of income taxation.

81

Under the Standardized Measure, future cash inflows were estimated by applying year end oil and gas prices to the estimated future production of year end proved reserves. Estimates of future income taxes are computed using current statutory income tax rates including consideration for estimated future statutory depletion and tax credits. The resulting net cash flows are reduced to present value amounts by applying a 10% discount factor. Use of a 10% discount rate and year end prices are required by SFAS 69.

The Standardized Measure is as follows (in thousands):

	Year Ended December 31,
	2005			2004			2003
Future cash inflows	$	3,636,669		$	1,347,069		$	181,300
Future production costs		(988,796	)		(376,814	)		(75,104	)
Future development costs		(255,800	)		(78,825	)		(8,366	)
Future net cash flows before income taxes		2,392,073			891,430			97,830
Future income tax expense		(620,660	)		(171,148	)		(15,739	)
Future net cash flows before 10% discount		1,771,413			720,282			82,091
10% annual discount for estimated timing of cash flows		(1,029,372	)		(337,265	)		(33,758	)
Standardized measure of discounted future net cash flows	$	742,041		$	383,017		$	48,333

Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

The following is a summary of the changes in the Standardized Measure of discounted future net cash flows for the Company’s proved oil and gas reserves during each of the years in the three year period ended December 31, 2005 (in thousands).

	Year Ended December 31,
	2005			2004			2003
Beginning of year	$	383,017		$	48,333		$	35,929
Sale of oil and gas produced, net of production costs		(257,622	)		(25,219	)		(9,157	)
Purchase of minerals in place		695,811			476,716			—
Sales of minerals in place		(71,585	)		(162	)		—
Extensions and discoveries		148,154			13,196			22,897
Changes in income taxes, net		(256,222	)		(71,488	)		(9,129	)
Changes in prices and costs		222,188			(20,183	)		3,105
Changes in development costs		(147,275	)		(65,451	)		(4,718	)
Accretion of discount		47,470			4,833			3,593
Changes in production rates and other		(21,895	)		22,442			5,813
End of year	$	742,041		$	383,017		$	48,333

82

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents selected quarterly financial data derived from the Company’s consolidated financial statements. The following data is only a summary and should be read with the Company’s historical consolidated financial statements and related notes contained in this document. The acquisition of Mission in 2005 and of Wynn-Crosby in 2004 affects the comparability between the financial data for the periods presented.

	Quarter Ended
(In thousands of dollars, except per share amounts)	March 31			June 30			September 30			December 31
2005
Oil and gas sales	$	32,326		$	36,184		$	81,447		$	108,082
Income from operations		9,030			11,427			34,018			49,415
Net income (loss) (1)		(14,252	)		(2,202	)		(36,424	)		36,244
Earnings (loss) per share:
Basic	$	(0.36	)	$	(0.06	)	$	(0.56	)	$	0.49
Diluted	$	(0.36	)	$	(0.06	)	$	(0.56	)	$	0.48
2004
Oil and gas sales	$	4,052		$	4,988		$	5,589		$	18,948
Income from operations		1,146			(1,015	)		586			3,982
Net income (loss)		1,012			(1,393	)		(601	)		9,099
Earnings (loss) per share:
Basic	$	0.14		$	(0.16	)	$	(0.05	)	$	0.65
Diluted	$	0.14		$	(0.16	)	$	(0.05	)	$	0.26

⁽¹⁾ The volatility in net income (loss) is substantially due to the Company’s accounting policy to mark derivative positions to market and not apply cash flow hedge accounting. See Note 7, Derivative and Hedging Activity for additional information.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2005 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s Report on Internal Control over Financial Reporting

Management’s report on internal control over financial reporting as of December 31, 2005 can be found on page 42 of the Financial Section of this report.

Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005, was audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included on page 43 of the Financial Section of this report.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the three months ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required to be contained in this Item is incorporated by reference to our definitive proxy statement to be filed with respect to our 2006 annual meeting under the heading Directors and Executive Officers of the Registrant.

ITEM 11. EXECUTIVE COMPENSATION

The information required to be contained in this Item is incorporated by reference to our definitive proxy statement to be filed with respect to our 2006 annual meeting under the heading Executive Compensation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required to be contained in this Item is incorporated by reference to our definitive proxy statement to be filed with respect to our 2006 annual meeting under the heading Principal Stockholders and Security Ownership of Management and Related Stockholder Matters.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be contained in this Item is incorporated by reference to our definitive proxy statement to be filed with respect to our 2006 annual meeting under the heading Certain Transactions.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required to be contained in this Item is incorporated by reference to our definitive proxy statement to be filed with respect to our 2006 annual meeting under the heading Ratification of Appointments of Independent Auditors.

85

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(1) Consolidated Financial Statements:

The consolidated financial statements of the Company and its subsidiaries and report of independent public accountants listed in Section 8 of this Form 10-K are filed as a part of this Form 10-K

(2) Consolidated Financial Statements Schedules:

All schedules are omitted because they are inapplicable or because the required information is contained in the financial statements or included in the notes thereto.

(3) Exhibits:

The following documents are included as exhibits to this Form 10-K.

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated April 3, 2005 (and as amended through June 8, 2005), by and among Petrohawk Energy Corporation, Petrohawk Acquisition Corporation, and Mission Resources Corporation (Incorporated by reference to Annex A of our Registration Statement on Form S-4/A filed on June 22, 2005).
2.2	Agreement and Plan of Merger, dated October 13, 2004, among Petrohawk Energy Corporation, Wynn-Crosby Energy, Inc., Ronald W. Crosby and Paige L. Crosby (Incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on November 24, 2004).
2.3	Agreement and Plan of Mergers, dated October 13, 2004, among Petrohawk Energy Corporation, Wynn-Crosby Energy, Inc., Wynn-Crosby 1994, Ltd.; Wynn-Crosby 1995, Ltd.; Wynn-Crosby 1996, Ltd.; Wynn-Crosby 1997, Ltd.; Wynn-Crosby 1998, Ltd.; Wynn-Crosby 1999, Ltd.; Wynn-Crosby 2000, Ltd.; Wynn-Crosby 2002, Ltd.; WCOG Properties, Ltd.; Kara Nicole Limited; Kristen Lee Limited; Eric Wynn Limited; Christopher David Limited; Paige Lee Limited; Bernadien Wynn Limited; Roger Lee Limited; and George Heaps Limited, and Ronald W. Crosby (Incorporated by reference to Exhibit 2.2 of our Current Report on Form 8-K filed on November 24, 2004).
2.4	Amendment to Agreement and Plan of Mergers among Petrohawk Energy Corporation, Wynn-Crosby Energy, Inc., Wynn-Crosby 1994, Ltd.; Wynn-Crosby 1995, Ltd.; Wynn-Crosby 1996, Ltd.; Wynn-Crosby 1997, Ltd.; Wynn-Crosby 1998, Ltd.; Wynn-Crosby 1999, Ltd.; Wynn-Crosby 2000, Ltd.; Wynn-Crosby 2002, Ltd.; WCOG Properties, Ltd.; Kara Nicole Limited; Kristen Lee Limited; Eric Wynn Limited; Christopher David Limited; Paige Lee Limited; Bernadien Wynn Limited; Roger Lee Limited; and George Heaps Limited, and Ronald W. Crosby, dated October 26, 2004 (Incorporated by reference to Exhibit 2.3 of our Current Report on Form 8-K filed on November 24, 2004).
2.5	Stock Purchase Agreement among Winwell Resources, Inc. and all of its Shareholders, as Sellers, and Petrohawk Energy Corporation, as Buyer, dated as of December 14, 2005 (Incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed December 20, 2005).
2.6	Asset Purchase Agreement among Redley Company, Burris Run Company and Red Clay Minerals, collectively as Seller, and Petrohawk Energy Corporation, as Buyer, dated as of December 14, 2005 (Incorporated by reference to Exhibit 2.2 of our Current Report on Form 8-K filed December 20, 2005).
2.7*	First Amendment to Asset Purchase Agreement among Redley Company, Burris Run Company and Red Clay Minerals, collectively as Seller, and Petrohawk Energy Corporation, as Buyer, effective as of December 14, 2005.
2.8*	Assignment Agreement between Petrohawk Properties, L.P. and Petrohawk Energy Corporation effective January 27, 2006.
2.9	Purchase and Sale Agreement executed January 14, 2005, by and between Wynn-Crosby 1994, Ltd., et al and Noble Royalties, Inc. d/b/a Brown Drake Royalties (Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on March 3, 2005).
2.10	Amendment to Purchase and Sale Agreement executed on February 15, 2005, by and between Wynn-Crosby 1994, Ltd., et al and Noble Royalty, Inc. d/b/a Brown Drake Royalties (Incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K filed on March 3, 2005).
2.11	Stock Purchase Agreement dated February 4, 2005 by and among Petrohawk Energy Corporation and Proton Oil & Gas Corporation, et al (Incorporated by reference to Exhibit 2.3 to our Current Report on Form 8-K filed on March 3, 2005).
2.12	Purchase and Sale Agreement between Petrohawk Energy Corporation and Petrohawk Properties, LP, together, as Seller, and Northstar GOM, LLC, as Buyer, dated February 3, 2006 (Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed February 9, 2006).

86

Exhibit No.	Description
3.1	Certificate of Incorporation for Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.1 to our Form S-8 filed on July 29, 2004).
3.2	Certificate of Amendment to Certificate of Incorporation for Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on November 24, 2004).
3.3	Certificate of Amendment of Certificate of Incorporation of Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on August 3, 2005).
3.4	Certificate of Designation of Petrohawk Energy Corporation’s 8% Cumulative Convertible Preferred Stock (Incorporated by reference to Exhibit 3.2 of our Form S-8 filed on July 29, 2004).
3.5	Amended and Restated Bylaws of Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed November 15, 2004).
3.6	Certificate of Designation, Preferences, Rights and Limitations of Series B 8% Automatically Convertible Preferred Stock of Petrohawk Energy Corporation (Incorporated by reference to Exhibit 10.4 of our Current Report on Form 8-K filed on November 24, 2004).
4.1	Form of Warrant Agreement covering warrants issued to employees as employment inducements (Incorporated by reference to Exhibit 4.1 of Beta Oil & Gas, Inc.’s Annual Report for the year ended December 31, 2003 Form 10-K filed on March 26, 2004).
4.2	Form of Warrant Agreement with suppliers, service providers, and other third parties (Incorporated by reference to Exhibit 4.1 of Beta Oil & Gas, Inc.’s Annual Report for the year ended December 31, 2003 Form 10-K filed on March 26, 2004).
4.3	Warrant Agreement between Beta and its preferred shareholders, including Warrant Certificates A and B (Incorporated by reference to Exhibit 4.1 of Beta Oil & Gas, Inc.’s Form 8-K filed on July 3, 2001).
4.4	Registration Rights Agreement, dated November 23, 2004, between Petrohawk Energy Corporation and Friedman, Billings, Ramsey & Co., Inc., for the benefit of the holders of series B preferred stock (Incorporated by reference to Exhibit 10.5 of our Form 8-K filed on November 24, 2004).
4.5	Registration Rights Agreement, dated May 25, 2004, between Petrohawk Energy Corporation and PHAWK LLC (Incorporated by reference to Exhibit 4.11 of our Form S-3 filed on December 1, 2004).
4.6	Registration Rights Agreement dated April 1, 2005 among Petrohawk Energy Corporation and the parties set forth on Exhibit A (North Sound Legacy International Ltd., North Sound Legacy Institutional Fund, LLC, and North Sound Legacy Fund LLC) of the Registration Rights Agreement (Incorporated by reference to Exhibit 4.6 of our Form 10-Q filed on May 12, 2005).
4.7	Registration Rights Agreement dated April 1, 2005 among Petrohawk Energy Corporation and the parties set forth on Exhibit A (GLG North American Opportunity Fund) of the Registration Rights Agreement (Incorporated by reference to Exhibit 4.12 to our Form S-3/A filed on July 14, 2005).
4.8	Registration Rights Agreement dated April 4, 2005 among Petrohawk Energy Corporation and the parties set forth on Exhibit A (Provident Premier Master Fund Ltd.) of the Registration Rights Agreement (Incorporated by reference to Exhibit 4.13 to our Form S-3/A filed on July 14, 2005).
4.9	Registration Rights Agreement, dated February 1, 2006, among Petrohawk Energy Corporation, Lehman Brothers Inc. and Friedman, Billings, Ramsey & Co., Inc. (Incorporated by reference to Exhibit 10.5 of our Form 8-K filed on February 1, 2006).
10.1	The Petrohawk Energy Corporation Amended and Restated 1999 Incentive and Nonstatutory Stock Option Plan (Incorporated by reference to Exhibit 99.3 of our Current Report on Form 8-K filed on August 18, 2004).
10.2	The Petrohawk Energy Corporation Second Amended and Restated 2004 Non-Employee Director Incentive Plan (Incorporated by reference to Exhibit 4.1 to our Registration Statement No. 333-117733 on Form S-8 filed July 29, 2005).
10.3*	Form of Stock Option Agreement for the Second Amended and Restated 2004 Non-Employee Director Incentive Plan.
10.4	Form of Restricted Stock Agreement for the Second Amended and Restated 2004 Non-Employee Director Incentive Plan (Incorporated by reference to Exhibit 10.4 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.5	Form of Incentive Stock Agreement for the Second Amended and Restated 2004 Non-Employee Director Incentive Plan (Incorporated by reference to Exhibit 10.5 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.6	The Petrohawk Energy Corporation Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 4.2 to our Registration Statement No. 333-117733 on Form S-8 filed July 29, 2005).
10.7	Form of Stock Option Agreement for the Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 10.7 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).

87

Exhibit No.	Description
10.8	Form of Restricted Stock Agreement for the Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 10.8 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.9	Form of Incentive Stock Agreement for the Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 10.9 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.10	Mission Resources Corporation 1994 Stock Incentive Plan (Incorporated by reference to Exhibit 10.9 of Mission Resources Corporation’s Registration Statement No. 33-76570 filed on March 17, 1994).
10.11	Mission Resources Corporation 1996 Stock Incentive Plan (Incorporated by reference to Exhibit A of Mission Resources Corporation’s Proxy Statement on Schedule 14A filed on October 21, 1996).
10.12	Mission Resources Corporation 2004 Incentive Plan (Incorporated by reference to Appendix C to Mission Resources Corporation’s Proxy Statement on Schedule 14A filed on March 30, 2004).
10.13	Nonstatutory Stock Option Grant Agreement dated as of November 1, 2004, between Mission Resources Corporation and Thomas C. Langford (Incorporated by reference to Exhibit 10.1 to Mission Resources Corporation’s Current Report on Form 8-K filed on November 2, 2004).
10.14	Nonstatutory Stock Option Grant Agreement dated as of March 14, 2005, between Mission Resources Corporation and William R. Picquet (Incorporated by reference to Exhibit 10.2 to Mission Resources Corporation’s Current Report on Form 8-K filed on March 16, 2005).
10.15	Form of Director and Officer Indemnity Agreement (Incorporated by reference to Exhibit 10.11 of our Annual Report on Form 10-K filed on March 31, 2005).
10.16	Securities Purchase Agreement dated December 12, 2003 between Beta Oil & Gas, Inc. and Petrohawk Energy, LLC (Incorporated by reference to Appendix A to Beta’s Preliminary Proxy Statement filed on Schedule 14A on January 9, 2004).
10.17	Amended and Restated Senior Revolving Credit Agreement dated July 28, 2005, among Petrohawk Energy Corporation, each of the Lenders from time to time party thereto, BNP Paribas as administrative agent for the Lenders, Bank of America, N.A., as syndication agent for the Lenders, and JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as co-documentation agents for the Lenders (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on August 3, 2005).
10.18	Amended and Restated Second Lien Term Loan Agreement dated July 28, 2005, among Petrohawk Energy Corporation, as Borrower, and BNP Paribas, as Administrative Agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on August 3, 2005).
10.19	Amended and Restated Guarantee and Collateral Agreement dated July 28, 2005, made by Petrohawk Energy Corporation and each of its subsidiaries, as Grantors, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on August 3, 2005).
10.20	Amended and Restated Second Lien Term Loan Agreement Amended and Restated Guarantee and Collateral Agreement dated July 28, 2005, made by Petrohawk Energy Corporation and each of its subsidiaries, as Grantors, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on August 3, 2005).
10.21	Convertible Promissory Note dated May 25, 2004 between PHAWK, LLC f/k/a Petrohawk Energy, LLC and Petrohawk Energy Corporation (Incorporated by reference to Exhibit 10.16 of our Annual Report on Form 10-K filed on March 31, 2005).
10.22	Agreement to Amend Note dated June 30, 2005 between Petrohawk Energy Corporation and PHAWK, LLC (Incorporated by reference to Exhibit 11 of Schedule 13D/A filed by PHAWK, LLC on July 19, 2005).
10.23	Agreement of Sale and Purchase dated August 11, 2004, by and between Petrohawk Energy Corporation and PHAWK, LLC (Incorporated by reference to Exhibit 10.20 of our Annual Report on Form 10-K filed on March 31, 2005).
10.24	Indenture dated as of April 8, 2004, among Mission Resources Corporation, the Guarantors named therein and The Bank of New York, as Trustee, relating to Petrohawk Energy Corporation’s 9 7/8 % Senior Notes due 2011 (Incorporated by reference to Exhibit 4.1 to Mission Resources Corporation’s Current Report on Form 8-K/A filed on April 15, 2004).
10.25	First Supplemental Indenture dated as of July 28, 2005, among Petrohawk Energy Corporation, the successor by way of merger to Mission Resources Corporation, the parties named therein as Existing Subsidiary Guarantors, the parties named therein as Additional Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as successor trustee to The Bank of New York (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on August 3, 2005).

88

Exhibit No.	Description
10.26*	First Amendment to Amended and Restated Senior Revolving Credit Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., dated as of November 16 2005.
10.27*	First Amendment to Amended and Restated Second Lien Term Loan Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., dated as of November 16, 2005.
10.28	Second Amendment to Amended and Restated Senior Revolving Credit Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., effective as of January 27, 2006 (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on February 1, 2006).
10.29	Second Amendment to Amended and Restated Second Lien Term Loan Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., effective as of January 27, 2006 (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on February 2, 2006).
10.30*	Stock Purchase Agreement between Petrohawk Energy Corporation and EnCap Investments, L.P., et al., effective as of January 10, 2006.
10.31	Supplement and Amendment to Amended and Restated Guarantee and Collateral Agreement (Revolver) effective as of January 27, 2006, by Petrohawk Energy Corporation, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on February 2, 2006).
10.32	Supplement and Amendment to Amended and Restated Guarantee and Collateral Agreement (Term Loan) effective as of January 27, 2006, by Petrohawk Energy Corporation, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on February 2, 2006)
10.33*	Placement Agreement dated January 25, 2006 among Petrohawk Energy Corporation, Lehman Brothers Inc. and Friedman, Billings, Ramsey & Co., Inc.
14.1	Code of Ethics (Incorporated by reference to Exhibit D of Beta Oil & Gas, Inc.’s Definitive Proxy on Schedule 14A filed on June 23, 2004).
16.1	Letter of Ernst & Young LLP (Incorporated by reference to Exhibit 16.1 our Current Report on Form 8-K/A filed on July 27, 2004).
21.1*	Subsidiaries of the Registrant
23.1*	Consent of Deloitte & Touche LLP
23.2*	Consent of Ernst & Young, LLP
23.3*	Consent of Netherland, Sewell & Associates, Inc.
31.1*	Certificate of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certificate of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities and Exchange Act of 1934 and 18 U.S.C. Section 1350.

* Attached hereto

89

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PETROHAWK ENERGY CORPORATION
Date: March 13, 2006	By:	/s/ Floyd C. Wilson
	Floyd C. Wilson
	Chairman of the Board, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Floyd C. Wilson		March 13, 2006
Floyd C. Wilson	Chairman of the Board, President and Chief Executive Officer
/s/ Shane M. Bayless		March 13, 2006
Shane M. Bayless	Executive Vice President, Chief Financial Officer and Treasurer
/s/ Mark J. Mize
Mark J. Mize	Vice President, Chief Accounting Officer and Controller	March 13, 2006
/s/ Tucker S. Bridwell	Director	March 13, 2006
Tucker S. Bridwell
/s/ David A.B. Brown	Director	March 13, 2006
David A.B. Brown
/s/ James L. Irish, III	Director	March 13, 2006
James L. Irish, III
/s/ David B. Miller	Director	March 13, 2006
David B. Miller
/s/ Thomas R. Fuller	Director	March 13, 2006
Thomas R. Fuller
/s/ Daniel A. Rioux	Director	March 13, 2006
Daniel A. Rioux
/s/ Herbert C. Williamson, III	Director	March 13, 2006
Herbert C. Williamson, III
/s/ Robert C. Stone, Jr.	Director	March 13, 2006
Robert C. Stone, Jr.

90

Index to Exhibits

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated April 3, 2005 (and as amended through June 8, 2005), by and among Petrohawk Energy Corporation, Petrohawk Acquisition Corporation, and Mission Resources Corporation (Incorporated by reference to Annex A of our Registration Statement on Form S-4/A filed on June 22, 2005).
2.2	Agreement and Plan of Merger, dated October 13, 2004, among Petrohawk Energy Corporation, Wynn-Crosby Energy, Inc., Ronald W. Crosby and Paige L. Crosby (Incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on November 24, 2004).
2.3	Agreement and Plan of Mergers, dated October 13, 2004, among Petrohawk Energy Corporation, Wynn-Crosby Energy, Inc., Wynn-Crosby 1994, Ltd.; Wynn-Crosby 1995, Ltd.; Wynn-Crosby 1996, Ltd.; Wynn-Crosby 1997, Ltd.; Wynn-Crosby 1998, Ltd.; Wynn-Crosby 1999, Ltd.; Wynn-Crosby 2000, Ltd.; Wynn-Crosby 2002, Ltd.; WCOG Properties, Ltd.; Kara Nicole Limited; Kristen Lee Limited; Eric Wynn Limited; Christopher David Limited; Paige Lee Limited; Bernadien Wynn Limited; Roger Lee Limited; and George Heaps Limited, and Ronald W. Crosby (Incorporated by reference to Exhibit 2.2 of our Current Report on Form 8-K filed on November 24, 2004).
2.4	Amendment to Agreement and Plan of Mergers among Petrohawk Energy Corporation, Wynn-Crosby Energy, Inc., Wynn-Crosby 1994, Ltd.; Wynn-Crosby 1995, Ltd.; Wynn-Crosby 1996, Ltd.; Wynn-Crosby 1997, Ltd.; Wynn-Crosby 1998, Ltd.; Wynn-Crosby 1999, Ltd.; Wynn-Crosby 2000, Ltd.; Wynn-Crosby 2002, Ltd.; WCOG Properties, Ltd.; Kara Nicole Limited; Kristen Lee Limited; Eric Wynn Limited; Christopher David Limited; Paige Lee Limited; Bernadien Wynn Limited; Roger Lee Limited; and George Heaps Limited, and Ronald W. Crosby, dated October 26, 2004 (Incorporated by reference to Exhibit 2.3 of our Current Report on Form 8-K filed on November 24, 2004).
2.5	Stock Purchase Agreement among Winwell Resources, Inc. and all of its Shareholders, as Sellers, and Petrohawk Energy Corporation, as Buyer, dated as of December 14, 2005 (Incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed December 20, 2005).
2.6	Asset Purchase Agreement among Redley Company, Burris Run Company and Red Clay Minerals, collectively as Seller, and Petrohawk Energy Corporation, as Buyer, dated as of December 14, 2005 (Incorporated by reference to Exhibit 2.2 of our Current Report on Form 8-K filed December 20, 2005).
2.7*	First Amendment to Asset Purchase Agreement among Redley Company, Burris Run Company and Red Clay Minerals, collectively as Seller, and Petrohawk Energy Corporation, as Buyer, effective as of December 14, 2005.
2.8*	Assignment Agreement between Petrohawk Properties, L.P. and Petrohawk Energy Corporation effective January 27, 2006.
2.9	Purchase and Sale Agreement executed January 14, 2005, by and between Wynn-Crosby 1994, Ltd., et al and Noble Royalties, Inc. d/b/a Brown Drake Royalties (Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on March 3, 2005).
2.10	Amendment to Purchase and Sale Agreement executed on February 15, 2005, by and between Wynn-Crosby 1994, Ltd., et al and Noble Royalty, Inc. d/b/a Brown Drake Royalties (Incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K filed on March 3, 2005).
2.11	Stock Purchase Agreement dated February 4, 2005 by and among Petrohawk Energy Corporation and Proton Oil & Gas Corporation, et al (Incorporated by reference to Exhibit 2.3 to our Current Report on Form 8-K filed on March 3, 2005).
2.12	Purchase and Sale Agreement between Petrohawk Energy Corporation and Petrohawk Properties, LP, together, as Seller, and Northstar GOM, LLC, as Buyer, dated February 3, 2006 (Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed February 9, 2006).

Exhibit No.	Description
3.1	Certificate of Incorporation for Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.1 to our Form S-8 filed on July 29, 2004).
3.2	Certificate of Amendment to Certificate of Incorporation for Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on November 24, 2004).
3.3	Certificate of Amendment of Certificate of Incorporation of Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on August 3, 2005).
3.4	Certificate of Designation of Petrohawk Energy Corporation’s 8% Cumulative Convertible Preferred Stock (Incorporated by reference to Exhibit 3.2 of our Form S-8 filed on July 29, 2004).
3.5	Amended and Restated Bylaws of Petrohawk Energy Corporation (Incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed November 15, 2004).
3.6	Certificate of Designation, Preferences, Rights and Limitations of Series B 8% Automatically Convertible Preferred Stock of Petrohawk Energy Corporation (Incorporated by reference to Exhibit 10.4 of our Current Report on Form 8-K filed on November 24, 2004).
4.1	Form of Warrant Agreement covering warrants issued to employees as employment inducements (Incorporated by reference to Exhibit 4.1 of Beta Oil & Gas, Inc.’s Annual Report for the year ended December 31, 2003 Form 10-K filed on March 26, 2004).
4.2	Form of Warrant Agreement with suppliers, service providers, and other third parties (Incorporated by reference to Exhibit 4.1 of Beta Oil & Gas, Inc.’s Annual Report for the year ended December 31, 2003 Form 10-K filed on March 26, 2004).
4.3	Warrant Agreement between Beta and its preferred shareholders, including Warrant Certificates A and B (Incorporated by reference to Exhibit 4.1 of Beta Oil & Gas, Inc.’s Form 8-K filed on July 3, 2001).
4.4	Registration Rights Agreement, dated November 23, 2004, between Petrohawk Energy Corporation and Friedman, Billings, Ramsey & Co., Inc., for the benefit of the holders of series B preferred stock (Incorporated by reference to Exhibit 10.5 of our Form 8-K filed on November 24, 2004).
4.5	Registration Rights Agreement, dated May 25, 2004, between Petrohawk Energy Corporation and PHAWK LLC (Incorporated by reference to Exhibit 4.11 of our Form S-3 filed on December 1, 2004).
4.6	Registration Rights Agreement dated April 1, 2005 among Petrohawk Energy Corporation and the parties set forth on Exhibit A (North Sound Legacy International Ltd., North Sound Legacy Institutional Fund, LLC, and North Sound Legacy Fund LLC) of the Registration Rights Agreement (Incorporated by reference to Exhibit 4.6 of our Form 10-Q filed on May 12, 2005).
4.7	Registration Rights Agreement dated April 1, 2005 among Petrohawk Energy Corporation and the parties set forth on Exhibit A (GLG North American Opportunity Fund) of the Registration Rights Agreement (Incorporated by reference to Exhibit 4.12 to our Form S-3/A filed on July 14, 2005).
4.8	Registration Rights Agreement dated April 4, 2005 among Petrohawk Energy Corporation and the parties set forth on Exhibit A (Provident Premier Master Fund Ltd.) of the Registration Rights Agreement (Incorporated by reference to Exhibit 4.13 to our Form S-3/A filed on July 14, 2005).
4.9	Registration Rights Agreement, dated February 1, 2006, among Petrohawk Energy Corporation, Lehman Brothers Inc. and Friedman, Billings, Ramsey & Co., Inc. (Incorporated by reference to Exhibit 10.5 of our Form 8-K filed on February 1, 2006).
10.1	The Petrohawk Energy Corporation Amended and Restated 1999 Incentive and Nonstatutory Stock Option Plan (Incorporated by reference to Exhibit 99.3 of our Current Report on Form 8-K filed on August 18, 2004).
10.2	The Petrohawk Energy Corporation Second Amended and Restated 2004 Non-Employee Director Incentive Plan (Incorporated by reference to Exhibit 4.1 to our Registration Statement No. 333-117733 on Form S-8 filed July 29, 2005).
10.3*	Form of Stock Option Agreement for the Second Amended and Restated 2004 Non-Employee Director Incentive Plan.
10.4	Form of Restricted Stock Agreement for the Second Amended and Restated 2004 Non-Employee Director Incentive Plan (Incorporated by reference to Exhibit 10.4 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.5	Form of Incentive Stock Agreement for the Second Amended and Restated 2004 Non-Employee Director Incentive Plan (Incorporated by reference to Exhibit 10.5 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.6	The Petrohawk Energy Corporation Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 4.2 to our Registration Statement No. 333-117733 on Form S-8 filed July 29, 2005).
10.7	Form of Stock Option Agreement for the Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 10.7 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).

Exhibit No.	Description
10.8	Form of Restricted Stock Agreement for the Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 10.8 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.9	Form of Incentive Stock Agreement for the Second Amended and Restated 2004 Employee Incentive Plan (Incorporated by reference to Exhibit 10.9 of our Second Quarter 2005 Form 10-Q filed on August 11, 2005).
10.10	Mission Resources Corporation 1994 Stock Incentive Plan (Incorporated by reference to Exhibit 10.9 of Mission Resources Corporation’s Registration Statement No. 33-76570 filed on March 17, 1994).
10.11	Mission Resources Corporation 1996 Stock Incentive Plan (Incorporated by reference to Exhibit A of Mission Resources Corporation’s Proxy Statement on Schedule 14A filed on October 21, 1996).
10.12	Mission Resources Corporation 2004 Incentive Plan (Incorporated by reference to Appendix C to Mission Resources Corporation’s Proxy Statement on Schedule 14A filed on March 30, 2004).
10.13	Nonstatutory Stock Option Grant Agreement dated as of November 1, 2004, between Mission Resources Corporation and Thomas C. Langford (Incorporated by reference to Exhibit 10.1 to Mission Resources Corporation’s Current Report on Form 8-K filed on November 2, 2004).
10.14	Nonstatutory Stock Option Grant Agreement dated as of March 14, 2005, between Mission Resources Corporation and William R. Picquet (Incorporated by reference to Exhibit 10.2 to Mission Resources Corporation’s Current Report on Form 8-K filed on March 16, 2005).
10.15	Form of Director and Officer Indemnity Agreement (Incorporated by reference to Exhibit 10.11 of our Annual Report on Form 10-K filed on March 31, 2005).
10.16	Securities Purchase Agreement dated December 12, 2003 between Beta Oil & Gas, Inc. and Petrohawk Energy, LLC (Incorporated by reference to Appendix A to Beta’s Preliminary Proxy Statement filed on Schedule 14A on January 9, 2004).
10.17	Amended and Restated Senior Revolving Credit Agreement dated July 28, 2005, among Petrohawk Energy Corporation, each of the Lenders from time to time party thereto, BNP Paribas as administrative agent for the Lenders, Bank of America, N.A., as syndication agent for the Lenders, and JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as co-documentation agents for the Lenders (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on August 3, 2005).
10.18	Amended and Restated Second Lien Term Loan Agreement dated July 28, 2005, among Petrohawk Energy Corporation, as Borrower, and BNP Paribas, as Administrative Agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on August 3, 2005).
10.19	Amended and Restated Guarantee and Collateral Agreement dated July 28, 2005, made by Petrohawk Energy Corporation and each of its subsidiaries, as Grantors, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on August 3, 2005).
10.20	Amended and Restated Second Lien Term Loan Agreement Amended and Restated Guarantee and Collateral Agreement dated July 28, 2005, made by Petrohawk Energy Corporation and each of its subsidiaries, as Grantors, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on August 3, 2005).
10.21	Convertible Promissory Note dated May 25, 2004 between PHAWK, LLC f/k/a Petrohawk Energy, LLC and Petrohawk Energy Corporation (Incorporated by reference to Exhibit 10.16 of our Annual Report on Form 10-K filed on March 31, 2005).
10.22	Agreement to Amend Note dated June 30, 2005 between Petrohawk Energy Corporation and PHAWK, LLC (Incorporated by reference to Exhibit 11 of Schedule 13D/A filed by PHAWK, LLC on July 19, 2005).
10.23	Agreement of Sale and Purchase dated August 11, 2004, by and between Petrohawk Energy Corporation and PHAWK, LLC (Incorporated by reference to Exhibit 10.20 of our Annual Report on Form 10-K filed on March 31, 2005).
10.24	Indenture dated as of April 8, 2004, among Mission Resources Corporation, the Guarantors named therein and The Bank of New York, as Trustee, relating to Petrohawk Energy Corporation’s 9 7/8 % Senior Notes due 2011 (Incorporated by reference to Exhibit 4.1 to Mission Resources Corporation’s Current Report on Form 8-K/A filed on April 15, 2004).
10.25	First Supplemental Indenture dated as of July 28, 2005, among Petrohawk Energy Corporation, the successor by way of merger to Mission Resources Corporation, the parties named therein as Existing Subsidiary Guarantors, the parties named therein as Additional Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as successor trustee to The Bank of New York (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on August 3, 2005).

Exhibit No.	Description
10.26*	First Amendment to Amended and Restated Senior Revolving Credit Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., dated as of November 16 2005.
10.27*	First Amendment to Amended and Restated Second Lien Term Loan Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., dated as of November 16, 2005.
10.28	Second Amendment to Amended and Restated Senior Revolving Credit Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., effective as of January 27, 2006 (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on February 1, 2006).
10.29	Second Amendment to Amended and Restated Second Lien Term Loan Agreement among Petrohawk Energy Corporation and BNP Paribas, et al., effective as of January 27, 2006 (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on February 2, 2006).
10.30*	Stock Purchase Agreement between Petrohawk Energy Corporation and EnCap Investments, L.P., et al., effective as of January 10, 2006.
10.31	Supplement and Amendment to Amended and Restated Guarantee and Collateral Agreement (Revolver) effective as of January 27, 2006, by Petrohawk Energy Corporation, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on February 2, 2006).
10.32	Supplement and Amendment to Amended and Restated Guarantee and Collateral Agreement (Term Loan) effective as of January 27, 2006, by Petrohawk Energy Corporation, in favor of BNP Paribas, as Administrative Agent (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on February 2, 2006)
10.33*	Placement Agreement dated January 25, 2006 among Petrohawk Energy Corporation, Lehman Brothers Inc. and Friedman, Billings, Ramsey & Co., Inc.
14.1	Code of Ethics (Incorporated by reference to Exhibit D of Beta Oil & Gas, Inc.’s Definitive Proxy on Schedule 14A filed on June 23, 2004).
16.1	Letter of Ernst & Young LLP (Incorporated by reference to Exhibit 16.1 our Current Report on Form 8-K/A filed on July 27, 2004).
21.1*	Subsidiaries of the Registrant
23.1*	Consent of Deloitte & Touche LLP
23.2*	Consent of Ernst & Young, LLP
23.3*	Consent of Netherland, Sewell & Associates, Inc.
31.1*	Certificate of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certificate of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities and Exchange Act of 1934 and 18 U.S.C. Section 1350.

* Attached hereto

EX-2.7

EXHIBIT 2.7

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

     THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this “Amendment”) is made and entered into effective as of December 14, 2005, by and among Redley Company, a Delaware general partnership, Burris Run Company, a Delaware general partnership, and Red Clay Minerals, a Delaware general partnership (hereafter collectively referred to as “Seller”), and Petrohawk Energy Corporation, a Delaware corporation (“Buyer”).

RECITALS:

     WHEREAS, Buyer and Seller entered into that certain Asset Purchase Agreement, dated effective as of December 14, 2005 (the “Agreement”);

     WHEREAS, Buyer and Seller desire to amend the Agreement as set forth below; and

     WHEREAS, all capitalized terms used but not otherwise defined shall have the meaning given such terms in the Asset Purchase Agreement;

     NOW, THEREFORE, in consideration of the premises, the respective representations, warranties, covenants and agreements contained herein, and other good and valuable consideration, the legal sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

     1. The parties agree (a) that Burris Run Company and Red Clay Minerals may withdraw, and are hereby withdrawing, from the Agreement; and (b) that Burris Run Company and Red Clay Minerals are hereby released from any and all representations, warranties, indemnities and covenants under the Agreement. All references to Burris Run Company and/or Red Clay Minerals in the Agreement and in the exhibits and schedules thereto are hereby deemed deleted ab initio. The parties understand that such deletions mean that, among other things, Burris Run Company and Red Clay Minerals are no longer deemed to have made any representations, warranties, indemnities or covenants under the Agreement.

     2. In Section 1.2(a) of the Agreement, the phrase “EIGHTY SIX MILLION SIX HUNDRED SEVENTY THOUSAND AND 00/100 DOLLARS ($86,670,000.00)” is hereby deleted and replaced with the following: “EIGHTY SIX MILLION ONE HUNDRED ELEVEN THOUSAND EIGHT HUNDRED NINE AND 00/100 DOLLARS ($86,111,809.00)”.

     3. In the first (1^st) sentence of Section 2.5(d) of the Agreement, the phrase “Except for Buyer’s remedies under this Agreement for a breach of Seller’s representation contained in Section 3.19,” is hereby deleted.

     4. In the definition of Threshold Amount in Article XI of the Agreement, the term “$500,000” is hereby deleted and replaced with the term “$750,000”.

     5. Exhibit B attached to the Agreement is hereby deleted and replaced with Exhibit B attached hereto and incorporated herein and into the Agreement by reference.

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     6. Schedule 1.6 attached to the Agreement is hereby deleted and replaced with Schedule 1.6 attached hereto and incorporated herein and into the Agreement by reference.

     7. The Agreement shall remain in full force and effect, as amended herein.

     8. This Amendment may be executed in counterparts, each of which will constitute an original, but all of which, when taken together, will constitute but one agreement. If the parties sign separate counterparts of this Amendment, then a signature page signed by one party and a signature page signed by another party may be placed together in a complete counterpart of this Amendment and such two signature pages, together with the remainder of such complete counterpart of this Amendment, will constitute one complete and fully-executed original of this Amendment. Executed copies hereof may be delivered by telecopier or electronic mail and upon receipt will be deemed originals and binding upon the parties hereto, regardless of whether originals are delivered thereafter.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date first above written.

“Buyer”: PETROHAWK ENERGY CORPORATION
By:	/s/ Floyd C. Wilson
Name:	Floyd C. Wilson
Title:	President and Chief Executive Officer
“Seller”: REDLEY COMPANY; BURRIS RUN COMPANY; and RED CLAY MINERALS
By:	/s/ Calisle D. Dean
	Calisle S. Dean, Agent

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EX-2.8

EXHIBIT 2.8

ASSIGNMENT AGREEMENT

          THIS ASSIGNMENT AGREEMENT (the “Assignment”) is made and executed effective the 27th day of January, 2006, by and between PETROHAWK ENERGY CORPORATION, a Delaware corporation (“Assignor”) and PETROHAWK PROPERTIES, LP, a Texas limited partnership (“Assignee”).

          WHEREAS, Assignor, as buyer, and Redley Company, Burris Run Company and Red Clay Minerals entered into a certain Asset Purchase Agreement dated December 14, 2005 (the “Original Asset Purchase Agreement”), which agreement was amended by that certain First Amendment to Asset Purchase Agreement dated effective as of December 14, 2006 (the “Amendment”) (which Amendment, among other items, removed Burris Run Company and Red Clay Minerals as parties) (the Original Asset Purchase Agreement as amended by the Amendment is referred to as the “Asset Purchase Agreement”);

          WHEREAS, Assignee is an Affiliate (as that term is defined in the Asset Purchase Agreement) of Assignor;

          WHEREAS, pursuant to Section 12.2 of the Asset Purchase Agreement, Assignor wishes to assign all of its rights and obligations under the Asset Purchase Agreement to Assignee; and

          WHEREAS, concurrently with the execution of this Assignment, Assignor has executed a Guaranty Agreement in the form of Exhibit F to the Asset Purchase Agreement.

          NOW, THEREFORE, in consideration of the foregoing recitations, the covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

          1. Assignment. Assignor hereby assigns to Assignee all of its rights and obligations under the Asset Purchase Agreement.

          2. Acceptance. Assignee hereby accepts such assignment and assumes all obligations under the Asset Purchase Agreement.

          3. Binding Effect. This Assignment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

EX-10.3

Exhibit 10.3

EMPLOYEE STOCK OPTION AGREEMENT

     THIS EMPLOYEE STOCK OPTION AGREEMENT (the “Agreement”) is made and entered into effective the      day of      , 200   , by and between PETROHAWK ENERGY CORPORATION, a Delaware corporation (the “Company”), and           (“Employee”).

     WHEREAS, to carry out the purposes of the Company’s Second Amended and Restated 2004 Employee Incentive Plan (the “Plan”), the Company desires to afford Employee the opportunity to purchase shares of the common stock of the Company (“Stock”).

     NOW THEREFORE, in consideration of the mutual agreements and other matters set forth herein and in the Plan, the Company and Employee hereby agree as follows:

     1. Grant of Option. The Company hereby grants to Employee the right and option (“Option”) to purchase all or any part of an aggregate of      shares of Stock, on the terms and conditions set forth herein and in the Plan, which Plan is incorporated herein by reference. This Option is intended to constitute an Incentive Stock Option, within the meaning of 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”); except that to the extent that the aggregate Fair Market Value of Stock (determined at the time the Option is granted) with respect to which Incentive Stock Options are exercisable for the first time by Employee during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds One Hundred Thousand Dollars ($100,000), such excess Incentive Stock Options shall be treated as Non-Statutory Stock Options.

     2. Purchase Price. The purchase price of Stock purchased pursuant to the exercise of this Option shall be $     per share, which has been determined to be the Fair Market Value of the Stock. For all purposes of this Agreement, Fair Market Value of Stock shall be determined in accordance with the provisions of the Plan.

     3. Vesting of Option. The Option granted hereunder shall vest as follows:

(a)	the option to purchase           shares of Stock is vested and exercisable as of           , 200   ;
(b)	the option to purchase           shares of Stock is vested and exercisable as of           , 200   ;
(c)	the option to purchase           shares of Stock is vested and exercisable as of           , 200  .

     Subject to the earlier expiration of this Option as herein provided, this Option may be exercised by written notice to the Company at is principal executive office addressed to the attention of its chief executive officer. This Option must be exercised on or before January 11, 2016 or it will expire worthless.

     The shares of Stock that are the subject of the Option are shares of Stock as presently constituted, but if, and whenever, prior to the expiration of an Option theretofore granted, the Company shall effect a subdivision or consolidation of shares of Stock or the payment of a stock dividend on Stock without receipt of consideration by the Company, the number of shares of Stock with respect to which such Option may thereafter be exercised (a) in the event of an increase in the number of outstanding shares of Stock shall be proportionately increased, and the purchase price per share shall be proportionately reduced, and (b) in the event of a reduction in the number of outstanding shares of Stock shall be proportionately reduced, and the purchase price per share shall be proportionately increased.

     If the Company recapitalizes and/or reclassifies its capital stock, the number and class of shares of Stock covered by an Option theretofore granted shall be adjusted as provided in the Plan.

     4. Transferability: This Option is not transferable or assignable other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined by Section 414(p) of the Code). If an Incentive Stock Option is transferred pursuant to a qualified domestic relations order, the Option shall cease to qualify as an Incentive Stock option as of the date of such transfer. The Committee (defined hereafter) may authorize the transfer of all or a portion of the Non-Statutory Stock Options subject to the terms of the Plan. The Non-Statutory Stock Option shall be exercisable by the transferee only to the extent, and for the periods, specified in paragraphs 3 and 5 of this Agreement.

     No transfer by will, trust, or by the laws of descent and distribution shall be effective to bind the Company unless the Compensation Committee of the board of directors of the Company or other such committee as the Board shall appoint to administer the Plan as permitted by the Plan (collectively herein the “Committee”) has been furnished with a copy of the deceased Employee’s enforceable will, trust or such other evidence as the Committee deems necessary to establish the validity of the transfer. Any attempted transfer in violation of this provision shall be void and ineffective.

     5. Exercise of Option. This Option may be exercised only by Employee during Employee’s lifetime while Employee remains an employee of the Company and will terminate and cease to be exercisable upon Employee’s termination of employment with the Company for any reason, except that:

(a) If Employee’s employment with the Company terminates by reason of disability within the meaning of section 22(e)(3) of the Code, this Option may be exercised in full (whether or not the option is fully vested) by Employee (or Employee’s estate or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of death of Employee) but only within such period of time ending on the earlier of (i) the date that is one (1) year following

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	such termination or (ii) the expiration of the term of the Option as set forth in the Agreement.
(b)	If Employee dies while in employ of the Company, Employee’s estate, or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of the death of Employee, may exercise Employee’s Option in full (whether or not the Option is fully vested) but only within such period of time ending on the earlier of (i) the date that is one (1) year following Employee’s death or (ii) the expiration of the term of the Option as set forth in the Agreement.
(c)	If Employee is terminated without Cause, Employee may exercise Employee’s Option but only within such period of time ending on the earlier of (i) the date that is three months following the termination of such person’s employment or (ii) the expiration of the term of the Option as set forth in the Agreement. For purposes of this Agreement, “Cause” shall mean Employee’s gross negligence or willful misconduct in performance of the duties of Employee’s employment, or Employee’s final conviction of a felony or of a misdemeanor involving moral turpitude.
(d)	If Employee voluntarily terminates employment with the Company, Employee may exercise Employee’s Option on the earlier of (i) the date that is three months following termination of such person’s employment or (ii) the expiration of the term of the Option as set forth in the Agreement, IF AND ONLY IF, the Company provides written consent to Employee providing that Employee may exercise the Option during such period.

     The purchase price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) subject to prior approval by the Committee in its discretion, by tendering previously acquired shares of Stock having an aggregate Fair Market Value at the time of exercise equal to the total purchase price (provided that the shares of Stock tendered have been held by Employee for at least six (6) months prior to their tender to satisfy the option price), or (c) subject to prior approval by the Committee in its discretion, by withholding shares of Stock which otherwise would be acquired on exercise having an aggregate Fair Market Value at the time of exercise equal to the total purchase price, or (d) subject to prior approval by the Committee in its discretion, by a combination of (a), (b), and (c) above. Any payment in shares of Stock shall be effected as provided for in the Plan. The Committee, in its discretion, also may allow the purchase price to be paid with such other consideration as shall constitute lawful consideration for the issuance of shares of Stock (including, without limitation, effecting a “cashless exercise,” as defined in the Plan, with a broker of the Option), subject to applicable securities law restrictions and tax withholdings, or by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law.

     As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver, or cause to be delivered, to or on behalf of Employee, in the name of

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Employee or other appropriate recipient, share certificates for the number of shares of Stock purchased under the Option. Unless and until such certificates have been issued by the Company to Employee, Employee (or other person permitted to exercise this Option in the event of Employee’s death) shall not be or have any rights or privileges of a stockholder of the Company with respect to the shares acquirable upon an exercise of this Option.

     6. Withholding of Tax. To the extent that the exercise of this Option or the disposition of shares of Stock acquired by exercise of this Option results in compensation income to Employee for federal or state income tax purposes, Employee shall deliver to the Company at the time of such exercise or disposition such amount of money or shares of Stock as the Company may require to meet its obligation under applicable tax laws or regulations, and, if Employee fails to do so, the Company is authorized to withhold from any cash or Stock remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income. Upon an exercise of this Option, the Company is further authorized in its discretion to satisfy any such withholding requirement out of any cash or shares of Stock distributable to Employee upon such exercise.

     Except as may otherwise be permitted by the Code, in the event of a permitted transfer of a Non-Statutory Stock Option hereunder, Employee shall remain subject to withholding taxes upon exercise. In addition, the Company shall have no obligation to provide any notices to the transferee including, for example, notice of the termination of a stock option following Employee’s termination of employment.

     7. Securities Laws. Employee agrees that the shares of Stock which Employee may acquire by exercising this Option will not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable securities laws, whether federal or state. Employee also agrees (i) that the certificates representing the shares of Stock purchased under this Option may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, and (ii) that the Company may refuse to register the transfer of such shares of Stock purchased under this Option on the stock transfer records of the Company if such proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of any applicable securities laws and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the shares of Stock purchased under this Option.

     8. Employment Relationship. For the purposes of this Agreement, Employee shall be considered to be in employment of the Company as long as Employee remains an employee of either the Company or a parent or subsidiary corporation (as defined in Section 424 of the Code) of the Company, or a corporation or a parent or subsidiary of such corporation assuming or substituting a new option for this Option. Nothing contained in this Agreement shall confer upon Employee the right to continue in the employ of the Company or its parent or subsidiary or any other corporation affiliated with the Company, or interfere in any way with the rights of the Company or its parent or subsidiaries or any other corporation affiliated with the Company to terminate Employee’s employment. Any question as to whether and when there has been a

4

termination of such employment, and the cause for such termination, shall be determined by the Committee and its determination shall be final.

     9. Representations and Warranties of Employee. The Employee represents and warrants to the Company as follows:

(a)	The Employee has received a copy of the Plan and has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their terms and conditions. The Employee acknowledges that there may be adverse tax consequences related to the Options and their vesting and exercise, and that Employee should consult a tax advisor prior to such time.
(b)	The Employee agrees to sign such additional documentation as may reasonably required from time to time by the Company in connection with this Agreement.

     10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Employee.

     11. Governing Laws. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware.

     12. Modification. This Agreement may not be modified except in writing signed by the parties hereto or their respective successors and permitted assigns.

     13. Headings. The headings of paragraphs in this Agreement are for convenience of reference only, do not constitute a part of this Agreement, and shall not be deemed to limit or alter any of the provisions of this Agreement.

     14. Defined Terms. Except as otherwise provided in this Agreement, or unless the context clearly indicates otherwise, capitalized terms used but not defined in this Agreement have the definitions as provided in the Plan. In the event of a conflict or inconsistency between the discretionary terms and provisions of the Plan and the provisions of this Agreement, this Agreement shall govern and control.

[remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed, by its officer thereunto duly authorized, and Employee has executed this Agreement, all as of the day and year first above written.

PETROHAWK ENERGY CORPORATION

By:

Name:

Title:

EMPLOYEE

Printed Name:

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EX-10.26

Exhibit 10.26

EXECUTION COPY

FIRST AMENDMENT

TO

AMENDED AND RESTATED SENIOR REVOLVING CREDIT AGREEMENT

Dated Effective as of November 16, 2005

among

PETROHAWK ENERGY CORPORATION,

as Borrower,

THE GUARANTORS,

BNP PARIBAS,

as Administrative Agent,

and

THE LENDERS PARTY HERETO

FIRST AMENDMENT TO AMENDED AND RESTATED SENIOR REVOLVING
CREDIT AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED SENIOR REVOLVING CREDIT AGREEMENT (this “First Amendment”) dated effective as of November 16, 2005, is among PETROHAWK ENERGY CORPORATION, a Delaware corporation (the “Borrower”); each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Obligors”); BNP PARIBAS, as administrative agent (in such capacity, together with its successors in such capacity, the “Administrative Agent”) for the lenders party to the Credit Agreement referred to below (collectively, the “Lenders”); and each of the undersigned Lenders.

R E C I T A L S

     A. The Borrower, the Agents and the Lenders are parties to that certain Amended and Restated Senior Revolving Credit Agreement dated as of July 28, 2005 (the “Credit Agreement”) pursuant to which the Lenders have made certain credit available to and on behalf of the Borrower.

     B. The Borrower has requested and the Lenders have agreed to amend certain provisions of the Credit Agreement.

     C. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     Section 1. Defined Terms. Each capitalized term used herein but not otherwise defined herein has the meaning given such term in the Credit Agreement. Unless otherwise indicated, all section references in this First Amendment refer to sections of the Credit Agreement.

     Section 2. Amendments to Credit Agreement.

     2.1 Amendments to Section 1.02. The definition of “Agreement” is hereby amended in its entirety to read as follows:

     “Agreement” means this Credit Agreement, as amended by the First Amendment, and as the same may from time to time be amended, modified, supplemented or restated.

     2.2 Redemption of Senior Unsecured Notes. Clause (i)(B) of Section 9.04(b) and the words “and/or” immediately preceding such clause are hereby deleted and the following inserted in lieu thereof:

     (B) prepay the Senior Unsecured Notes and any premiums relating thereto with the proceeds of any Permitted Refinancing Debt or with the Net Cash Proceeds of any sale of Equity Interests (other than Disqualified Capital Stock) of the Borrower and/or

     (C) Redeem or otherwise purchase the Senior Unsecured Notes, provided that (1) the aggregate amount spent to Redeem or otherwise purchase such Senior Unsecured Notes under this subclause (C) does not exceed $25,000,000 and (2) after giving pro forma effect to any such Redemption or purchase, the Borrower would have at least $25,000,000 of unused availability under the Commitments; or

     Section 3. Conditions Precedent. This First Amendment shall become effective as of November 16, 2005 on the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02 of the Credit Agreement):

     3.1 The Administrative Agent shall have received from the Majority Lenders, the Borrower and each Guarantor, counterparts (in such number as may be requested by the Administrative Agent) of this First Amendment signed on behalf of such Persons.

     3.2 All fees and other expenses required to be paid in connection with the First Amendment shall have been paid.

     3.3 No Default shall have occurred and be continuing, after giving effect to the terms of this First Amendment.

     Section 4. Miscellaneous.

     4.1 Confirmation. The provisions of the Credit Agreement, as amended by this First Amendment, shall remain in full force and effect following the effectiveness of this First Amendment.

     4.2 Ratification and Affirmation; Representations and Warranties. Each Obligor hereby (a) acknowledges the terms of this First Amendment; (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, each Loan Document to which it is a party and agrees that each Loan Document to which it is a party remains in full force and effect, except as expressly amended hereby, notwithstanding the amendments contained herein and (c) represents and warrants to the Lenders that as of the date hereof, after giving effect to the terms of this First Amendment: (i) all of the representations and warranties contained in each Loan Document to which it is a party are true and correct in all material respects, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties shall continue to be true and correct as of such specified earlier date, (ii) no Default has occurred and is continuing and (iii) since December 31, 2004, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.

     4.3 Loan Document. This First Amendment is a “Loan Document” as defined and described in the Credit Agreement and all of the terms and provisions of the Credit Agreement relating to Loan Documents shall apply hereto.

     4.4 Counterparts. This First Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together

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shall be deemed to constitute one and the same instrument. Delivery of this First Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

     4.5 No Oral Agreement. This First Amendment, the Credit Agreement and the other Loan Documents executed in connection herewith and therewith represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or unwritten oral agreements of the parties. There are no subsequent oral agreements between the parties.

     4.6 GOVERNING LAW. THIS FIRST AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

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     IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed, to be effective as of November 16, 2005.

BORROWER:	PETROHAWK ENERGY CORPORATION
	By:	/s/ Floyd C. Wilson
		Floyd C. Wilson
		President and Chief Executive Officer

S-1

GUARANTORS:	PETROHAWK OPERATING COMPANY
	P-H ENERGY, LLC
	PETROHAWK PROPERTIES, LP
	By:	P-H Energy, LLC Its General Partner
	BETA OPERATING COMPANY, L.L.C.
	By:	PETROHAWK ENERGY CORPORATION
		Its Sole Member
	TCM, L.L.C.
	By:	BETA OPERATING COMPANY, L.L.C.
		Its Sole Member
	By:	PETROHAWK ENERGY CORPORATION
		Its Sole Member
	RED RIVER FIELD SERVICES, L.L.C.
	By:	BETA OPERATING COMPANY, L.L.C.
		Its Sole Member
	By:	PETROHAWK ENERGY CORPORATION
		Its Sole Member
	PROHAWK OIL & GAS CORPORATION
	PROHAWK OPERATING, LLC
	By:	PROHAWK OIL & GAS CORPORATION
		Its Sole Member-Manager
	MISSION E&P LIMITED PARTNERSHIP
	By:	BLACK HAWK OIL COMPANY
		Its General Partner
	BLACK HAWK OIL COMPANY
	By:	/s/ Floyd C. Wilson
		Floyd C. Wilson
		President and Chief Executive Officer

S-2

PETROHAWK HOLDINGS, LLC
MISSION HOLDINGS LLC
By:	/s/ Connie D. Tatum
	Connie D. Tatum
	President

S-3

ADMINISTRATIVE AGENT:	BNP PARIBAS,
	as Administrative Agent
	By:	/s/ Brian M. Malone
	Name:	Brian M. Malone
	Title:	Managing Director
	By:	/s/ Evans R. Swann
	Name:	Evans R. Swann
	Title:	Director
	BNP PARIBAS
	By:	/s/ Brian M. Malone
	Name:	Brian M. Malone
	Title:	Managing Director
	By:	/s/ Evans R. Swann
	Name:	Evans R. Swann
	Title:	Director
	BANK OF AMERICA, N.A.
	By:	/s/ Gregory B. Hanson
	Name:	Gregory B. Hanson
	Title:	Vice President
	JPMORGAN CHASE BANK, N.A.
	By:	/s/ Elizabeth Pavlas
	Name:	Elizabeth Pavlas
	Title:	Assistant Vice President

S-4

WELLS FARGO BANK, N.A.
By:	/s/ Jeff Dalton
Name:	Jeff Dalton
Title:	Vice President
HARRIS NESBITT FINANCING, INC.
By:	/s/ James V. Ducote
Name:	James V. Ducote
Title:	Vice President
KEYBANK, NATIONAL ASSOCIATION
By:	/s/ Thomas Rajan
Name:	Thomas Rajan
Title:	Vice President
ALLIED IRISH BANKS P.L.C.
By:	/s/ Mark Connelly
Name:	Mark Connelly
Title:	Vice President
By:	/s/ Aidan Lanigan
Name:	Aidan Lanigan
Title:	Vice President
AMEGY BANK NATIONAL ASSOCIATION
By:	/s/ W. Bryan Chapman
Name:	W. Bryan Chapman
Title:	Senior Vice President, Energy Lending

S-5

FORTIS CAPITAL CORP.
By:
Name:
Title:
By:
Name:
Title:
SUNTRUST BANK
By:	/s/ Sean M. Roche
Name:	Sean M. Roche
Title:	Vice President
BANK OF TEXAS, N.A.
By:
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
By:	/s/ Monte E. Deckerd
Name:	Monte E. Deckerd
Title:	Vice President
COMERICA BANK
By:	/s/ Huma Vadgama
Name:	Huma Vadgama
Title:	Vice President

S-6

COMPASS BANK
By:	/s/ Murray E. Brasseux
Name:	Murray E. Brasseux
Title:	Executive Vice President
DEUTSCHE BANK TRUST COMPANY AMERICAS
By:	/s/ Evelyn Lazala
Name:	Evelyn Lazala
Title:	Vice President
By:	/s/ Lana Gifas
Name:	Lana Gifas
Title:	Vice President
MACQUARIE BANK LIMITED
By:
Name:
Title:
STERLING BANK
By:	/s/ Jeff A. Forbis
Name:	Jeff A. Forbis
Title:	Senior Vice President

S-7

EX-10.27

Exhibit 10.27

EXECUTION COPY

FIRST AMENDMENT

TO

AMENDED AND RESTATED SECOND LIEN TERM LOAN AGREEMENT

Dated Effective as of November 16, 2005

among

PETROHAWK ENERGY CORPORATION,

as Borrower,

THE GUARANTORS,

BNP PARIBAS,

as Administrative Agent,

and

THE LENDERS PARTY HERETO

FIRST AMENDMENT TO AMENDED AND RESTATED SECOND LIEN TERM LOAN
AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED SECOND LIEN TERM LOAN AGREEMENT (this “First Amendment”) dated effective as of November 16, 2005, is among PETROHAWK ENERGY CORPORATION, a Delaware corporation (the “Borrower”); each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Obligors”); BNP PARIBAS, as administrative agent (in such capacity, together with its successors in such capacity, the “Administrative Agent”) for the lenders party to the Credit Agreement referred to below (collectively, the “Lenders”); and each of the undersigned Lenders.

R E C I T A L S

     A. The Borrower, the Agents and the Lenders are parties to that certain Amended and Restated Second Lien Term Loan Agreement dated as of July 28, 2005 (the “Credit Agreement”) pursuant to which the Lenders have made that certain $150 million term loan to the Borrower.

     B. The Borrower has requested and the Lenders have agreed to amend certain provisions of the Credit Agreement.

     C. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     Section 1. Defined Terms. Each capitalized term used herein but not otherwise defined herein has the meaning given such term in the Credit Agreement. Unless otherwise indicated, all section references in this First Amendment refer to sections of the Credit Agreement.

     Section 2. Amendments to Credit Agreement.

     2.1 Amendments to Section 1.02. The definition of “Agreement” is hereby amended in its entirety to read as follows:

     “Agreement” means this Credit Agreement, as amended by the First Amendment, and as the same may from time to time be amended, modified, supplemented or restated.

     2.2 Redemption of Senior Unsecured Notes. Clause (i) of Section 9.04(b) is hereby deleted and the following inserted in lieu thereof:

     (i) call, make or offer to make any optional or voluntary Redemption of or otherwise optionally or voluntarily Redeem (whether in whole or in part) the Senior Unsecured Notes or any Permitted Refinancing Debt in respect thereof; provided that the Borrower may (1) prepay the Senior Unsecured Notes and any premiums relating thereto

with the proceeds of any Permitted Refinancing Debt or with the Net Cash Proceeds of any sale of Equity Interests (other than Disqualified Capital Stock) of the Borrower, and/or (2) Redeem or otherwise purchase the Senior Unsecured Notes, provided that (A) the aggregate amount spent to Redeem or otherwise purchase such Senior Unsecured Notes does not exceed $25,000,000 and (B) after giving pro forma effect to any such Redemption or purchase, the Borrower would have at least $25,000,000 of unused availability under the Senior Revolving Credit Agreement; or

     Section 3. Conditions Precedent. This First Amendment shall become effective as of November 16, 2005 on the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02 of the Credit Agreement):

     3.1 The Administrative Agent shall have received from the Majority Lenders, the Borrower and each Guarantor, counterparts (in such number as may be requested by the Administrative Agent) of this First Amendment signed on behalf of such Persons.

     3.2 All fees and other expenses required to be paid in connection with the First Amendment shall have been paid.

     3.3 No Default shall have occurred and be continuing, after giving effect to the terms of this First Amendment.

     Section 4. Miscellaneous.

     4.1 Confirmation. The provisions of the Credit Agreement, as amended by this First Amendment, shall remain in full force and effect following the effectiveness of this First Amendment.

     4.2 Ratification and Affirmation; Representations and Warranties. Each Obligor hereby (a) acknowledges the terms of this First Amendment; (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, each Loan Document to which it is a party and agrees that each Loan Document to which it is a party remains in full force and effect, except as expressly amended hereby, notwithstanding the amendments contained herein and (c) represents and warrants to the Lenders that as of the date hereof, after giving effect to the terms of this First Amendment: (i) all of the representations and warranties contained in each Loan Document to which it is a party are true and correct in all material respects, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties shall continue to be true and correct as of such specified earlier date, (ii) no Default has occurred and is continuing and (iii) since December 31, 2004, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.

     4.3 Loan Document. This First Amendment is a “Loan Document” as defined and described in the Credit Agreement and all of the terms and provisions of the Credit Agreement relating to Loan Documents shall apply hereto.

-2-

     4.4 Counterparts. This First Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of this First Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

     4.5 No Oral Agreement. This First Amendment, the Credit Agreement and the other Loan Documents executed in connection herewith and therewith represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or unwritten oral agreements of the parties. There are no subsequent oral agreements between the parties.

     4.6 GOVERNING LAW. THIS FIRST AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

-3-

     IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed, to be effective as of November 16, 2005.

BORROWER:	PETROHAWK ENERGY CORPORATION
	By:	/s/ Floyd C. Wilson
		Floyd C. Wilson
		President and Chief Executive Officer

S-1

GUARANTORS:	PETROHAWK OPERATING COMPANY
	P-H ENERGY, LLC
	PETROHAWK PROPERTIES, LP
	By:	P-H Energy, LLC
		Its General Partner
	BETA OPERATING COMPANY, L.L.C.
	By:	PETROHAWK ENERGY CORPORATION
		Its Sole Member
	TCM, L.L.C.
	By:	BETA OPERATING COMPANY, L.L.C.
		Its Sole Member
	By:	PETROHAWK ENERGY CORPORATION
		Its Sole Member
	RED RIVER FIELD SERVICES, L.L.C.
	By:	BETA OPERATING COMPANY, L.L.C.
		Its Sole Member
	By:	PETROHAWK ENERGY CORPORATION
		Its Sole Member
	PROHAWK OIL & GAS CORPORATION
	PROHAWK OPERATING, LLC
	By:	PROHAWK OIL & GAS CORPORATION
		Its Sole Member-Manager
	MISSION E&P LIMITED PARTNERSHIP
	By:	BLACK HAWK OIL COMPANY
		Its General Partner
	BLACK HAWK OIL COMPANY
	By:	/s/ Floyd C. Wilson
		Floyd C. Wilson
		President and Chief Executive Officer

S-2

PETROHAWK HOLDINGS, LLC
MISSION HOLDINGS LLC
By:	/s/ Connie D. Tatum
	Connie D. Tatum
	President

S-3

ADMINISTRATIVE AGENT:	BNP PARIBAS,
	as Administrative Agent
	By:	/s/ Brian M. Malone
	Name:	Brian M. Malone
	Title:	Managing Director
	By:	/s/ Evans R. Swann
	Name:	Evans R. Swann
	Title:	Director
	BNP PARIBAS
	By:	/s/ Brian M. Malone
	Name:	Brian M. Malone
	Title:	Managing Director
	By:	/s/ Evans R. Swann
	Name:	Evans R. Swann
	Title:	Director

S-4

EX-10.30

EXHIBIT 10.30

Execution Copy

STOCK PURCHASE AGREEMENT

     This STOCK PURCHASE AGREEMENT (this “Agreement”) is dated effective as of January 10, 2006 by and among Petrohawk Energy Corporation, a Delaware corporation (the “Company”), and the entities listed on Schedule I to this Agreement (each a “Holder” and collectively, the “Holders”).

     WHEREAS, the Company intends to enter into a placement agreement (the “Placement Agreement”) with Lehman Brothers Inc. and Friedman, Billings, Ramsey & Co., Inc., as placement agents (collectively, the “Placement Agents”) pursuant to which the Company is offering to sell to accredited investors for cash pursuant to a private placement memorandum (the “Private Offering”), a number of shares of its common stock, par value $0.001 per share (“Common Stock”) sufficient to result in net proceeds to the Company (after placement agents’ fees, before offering expenses and the repurchase of any Common Stock from Holders as provided herein, “Net Proceeds”) of $166,000,000 (the “Target Offering Amount”). The closing of such offer and sale is hereinafter referred to as the “Initial Offering Closing” and the date of such Initial Offering Closing is hereinafter referred to as the “Initial Offering Closing Date”; and

     WHEREAS, on the Initial Offering Closing Date (contemporaneously with the Initial Offering Closing), each Holder desires to sell to the Company, and the Company desires to purchase from each Holder, all of the shares of Common Stock set forth opposite such Holder’s name on Schedule I hereto under the heading “Shares” (such shares being hereinafter referred to as the “Shares” and such purchase and sale being hereinafter referred to as the “Purchase”), if the entire Target Offering Amount is raised in the Private Offering and subject to proportionate reduction in the event the shares of common stock to be sold by the Company to the Placement Agents upon the Initial Offering Closing yields Net Proceeds less than the Target Offering Amount; and

     NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF COMMON STOCK;
CLOSINGS

     On the basis of the representations and warranties contained herein and subject to the terms and conditions hereof:

     1.1. Delivery of EnCap Certificates. Prior to the time the Placement Agreement is executed, each Holder will deliver to the Company the certificate or certificates representing the Shares owned by such Holder (the “EnCap Certificates”), duly endorsed in blank or accompanied by separate stock powers so endorsed with all signatures guaranteed by a commercial bank or trust company having an office or correspondent in the United States or a member firm of the New York Stock Exchange.

     1.2. Closing.

     (a) Closing Date. At the time the Placement Agreement is executed by the Company, and not before, the Company shall become obligated to purchase, and each Holder will become obligated to sell hereunder, subject to satisfaction or waiver of the conditions set forth herein, the Shares, which purchase and sale (the “EnCap Closing”) will take place at the offices of the Company on the Initial Offering Closing Date contemporaneously with the Initial Offering Closing.

     (b) Purchase and Sale of Shares. At the EnCap Closing, each Holder will sell to the Company, and the Company will purchase from each Holder, a number of such Holder’s Shares, at a price equal to the Net Proceeds to be received by the Company from the Private Offering divided by the number of shares sold by the Company in the Private Offering (the “Per Share Price”), determined as follows:

     (i) 100% of such Holder’s Shares as reflected on Schedule I, if the Private Offering yields Net Proceeds equal to or greater than the Target Offering Amount; and

     (ii) if the Private Offering yields Net Proceeds less than the Target Offering Amount, a number of shares equal to the number of Shares owned by Holder as set forth on Schedule I, multiplied by a fraction, the numerator of which shall be the actual Net Proceeds to the Company raised in the Private Offering at the Initial Offering Closing, and the denominator of which is the Target Offering Amount.

     (c) Payment. On the EnCap Closing Date, the Company shall pay to each Holder the Per Share Price for each Share to be purchased by the Company from such Holder in the Purchase by wire transfer of immediately available funds to an account designated in writing by such Holder to the Company at least one business day prior to the Initial Offering Closing Date.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF
EACH HOLDER

     Each Holder represents and warrants to the Company, with respect to itself only, as follows:

     2.1. Existence and Power. Each Holder has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of formation or organization, with the requisite power and authority to execute and deliver this Agreement and consummate the transactions and perform each of its obligations contemplated hereunder.

     2.2. Authority; Enforceability. The execution and delivery of this Agreement by the Holder and the consummation by the Holder of each of the transactions and the performance by the Holder of each of its obligations contemplated herein have been duly and properly authorized

by all necessary action on the part of the Holder. This Agreement has been duly executed and delivered by the Holder and constitutes the valid and legally binding obligation of such Holder, enforceable against such Holder in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

     2.3. Ownership of Common Stock. The Holder is the record and beneficial owner of the number of Shares set forth opposite such Holder’s name on Schedule I to this Agreement, and such shares of Common Stock are free and clear of all mortgages, pledges, security interests, liens, claims, encumbrances, equities or other restrictions (collectively, the “Liens”). Upon payment for the shares of Common Stock to be sold by such Holder in accordance with the terms and conditions of this Agreement, the Company will acquire good and valid title to such shares free and clear all Liens.

     2.4. No Conflicts. The execution and delivery of this Agreement by the Holder and the consummation by the Holder of each of the transactions and the performance by the Holder of each of its obligations contemplated herein (a) do not conflict with or violate (whether with or without notice or a lapse of time or both), require the consent of any Person to or otherwise result in a material detriment to the Holder under its organizational documents or any agreement to which it is a party or any law or order applicable to it, in each case in a manner that could reasonably be expected to materially hinder or impair the completion of any of the transactions contemplated hereby or have a material adverse effect on the business, properties, condition (financial or otherwise), liabilities or prospects of the Holder; and (b) do not impose any penalty or other onerous condition on the Holder that could reasonably be expected to materially hinder or impact the completion of any of the transactions contemplated hereby. As used herein, the term “Person” means a natural person, corporation, limited liability company, venture, partnership, trust, unincorporated organization, association or other entity.

     2.5. No Governmental Approvals. No approval from any Governmental Entity is required by or with respect to the Holder in connection with the execution and delivery by the Holder of this Agreement or the consummation by the Holder of the transactions contemplated herein, except for any such approval the failure of which to be made or obtained (a) has not impaired and could not reasonably be expected to impair the ability of the Holder to perform its obligations under this Agreement in any material respect and (b) could not reasonably be expected to delay in any material respect or prevent the consummation of any of the transactions contemplated herein. As used herein, the term “Governmental Entity” means any agency, bureau, commission, authority, department, official, political subdivision, tribunal or other instrumentality of any government, whether (i) regulatory, administrative or otherwise; (ii) federal, state or local or (iii) domestic or foreign.

     2.6. Independent Investigation. Holder (a) has the requisite knowledge, sophistication and experience in order to fairly evaluate a disposition of the shares of Common Stock to be sold by such Holder hereunder, including the risks associated therewith, and (b) has adequate information, and has made its own independent investigation of the Company, to make an informed decision regarding the sale of such shares of Common Stock pursuant to this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF
THE COMPANY

     The Company hereby represents and warrants to each Holder as follows:

     3.1. Existence and Power. The Company has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Delaware, with the requisite corporate power and authority to execute and deliver this Agreement and consummate the transactions and perform each of its obligations hereunder.

     3.2. Authority; Enforceability. The execution and delivery of this Agreement by the Company and the consummation by the Company of each of the transactions and the performance by the Company of each of its obligations contemplated herein have been duly and properly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company, enforceable against it in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

     3.3. No Conflicts. The execution and delivery of this Agreement by the Company and the consummation of each of the transactions and the performance of each of the obligations contemplated herein (a) do not conflict with or violate (whether with or without notice or a lapse of time or both), require the consent of any Person to or otherwise result in a material detriment to the Company under its organizational documents or any agreement to which it is a party or any law or order applicable to it, in each case in a manner that could reasonably be expected to materially hinder or impair the completion of any of the transactions contemplated herein or have a material adverse effect on the business, properties, condition (financial or otherwise), liabilities or prospects of the Company, other than consents that have been obtained by the Company prior to the date hereof; and (b) do not impose any penalty or other onerous condition on the Company that could reasonably be expected to materially hinder or impact the completion of any of the transactions contemplated herein.

     3.4. No Governmental Approvals. No approval from any Governmental Entity is required by or with respect to the Company in connection with the execution and delivery by the Company of this Agreement or the consummation by the Company of the transactions contemplated herein, except for any such approval the failure of which to be made or obtained (a) has not impaired and could not reasonably be expected to impair the ability of the Company to perform its obligations under this Agreement in any material respect and (b) could not reasonably be expected to delay in any material respect or prevent the consummation of any of the transactions contemplated herein.

ARTICLE IV

CONDITIONS TO CLOSING

     4.1. Conditions to Obligations of the Company. The obligation of the Company to purchase the shares of Common Stock hereunder is subject to the satisfaction or waiver on or prior to the Initial Offering Closing Date of each the following conditions:

     (a) No action, claim, suit, hearing, complaint, demand, injunction, litigation, judgment, arbitration, order, decree, ruling or governmental investigation or proceeding shall be pending or threatened by any Governmental Entity, and no such Governmental Entity shall have issued any injunction, judgment or order, which shall remain in effect, that would prevent the consummation of the transactions contemplated herein.

     (b) Each Holder shall have performed in all material respects all of its obligations hereunder required to be performed by it on or prior to the Initial Offering Closing Date.

     (c) The representations and warranties of each Holder contained in this Agreement and in any certificate or other writing delivered by each Holder pursuant hereto shall be true and correct in all material respects on and as of the date hereof and on and as of the Initial Offering Closing Date, as though made on and as of such date.

     (d) The Company shall have received a certificate signed by a duly authorized representative of each Holder to the effects set forth in Section 4.1(b) and (c) above.

     (e) In the event that less than all of each Holder’s Shares are repurchased hereunder, each Holder shall have executed and delivered to the Placement Agents a lock-up agreement in the form negotiated by the Company and the Placement Agents for execution by significant stockholders of the Company.

     (f) The Initial Offering Closing has occurred.

     4.2. Conditions of Obligations of Holders. The obligation of each Holder to sell the shares of Common Stock hereunder is subject to the satisfaction or waiver on or prior to the Initial Offering Closing Date of each the following conditions:

     (a) No action, claim, suit, hearing, complaint, demand, injunction, litigation, judgment, arbitration, order, decree, ruling or governmental investigation or proceeding shall be pending or threatened by any Governmental Entity, and no such Governmental Entity shall have issued any injunction, judgment or order, which shall remain in effect, that would prevent the consummation of the transactions contemplated herein.

     (b) The Company shall have performed in all material respects all of its obligations hereunder required to be performed by it on or prior to the Initial Offering Closing Date.

     (c) The representations and warranties of the Company contained in this Agreement and in any certificate or other writing delivered by the Company pursuant hereto shall be true and correct in all material respects on and as of the date hereof and on and as of the Initial Offering Closing Date, as though made on and as of such date.

     (d) Each Holder shall have received a certificate signed by a duly authorized officer of the Company to the effects set forth in Section 4.2(b) and (c) above.

ARTICLE V

GOVERNMENTAL FILINGS

     Each Holder shall make all filings with any Governmental Entity required by such Holder in connection with the execution and delivery by such Holder of this Agreement and the consummation by such Holder of the transactions contemplated herein, including without limitation, all filings with the Securities and Exchange Commission required pursuant to the Securities Exchange Act of 1934, as amended.

ARTICLE VI

GENERAL PROVISIONS

     6.1. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,

     If to the Holders, to:

EnCap Investments L.P.
3811 Turtle Creek Blvd., Suite 1080
Dallas, Texas 75219
Attention: David B. Miller
Facsimile: (214) 599-0200

With a copy (which shall not constitute notice) to:

Thompson & Knight LLP
333 Clay Street, Suite 3300
Houston, Texas 77002
Attention: Michael K. Pierce
Facsimile: (713) 654-1871

     If to the Company, to:

Petrohawk Energy Corporation
1100 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Chief Financial Officer
Facsimile: (832) 204-2877

with copies (which shall not constitute notice) to:

Hinkle Elkouri Law Firm L.L.C.
2000 Epic Center
301 North Main Street
Wichita, Kansas 67202
Attention: David S. Elkouri, Esq.
Facsimile: (316) 264-1518

and

Thompson & Knight LLP
333 Clay Street, Suite 3300
Houston, Texas 77002
Attention: Dallas Parker
Facsimile: (713) 654-1871

     All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt. By notice given in accordance with this Section 6.1 to the other party, any party may change its address for the receipt of notices under this Agreement.

     6.2. Amendments and Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

     6.3. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

     6.4. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, without reference to its conflict of laws principles.

     6.5. Section Headings. The captions and headings appearing at the beginning of the various sections of this Agreement are for convenience of reference only and shall not be given any effect whatsoever in the construction or interpretation of this Agreement.

     6.6. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, this being in addition to any other remedy to which they are entitled at law or in equity.

     6.7. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

6.8. Termination.

     (a) Notwithstanding any provision in this Agreement to the contrary, this Agreement shall terminate in the event the Placement Agreement is terminated. If this Agreement is terminated, the Company will have no obligation to purchase the Shares and the Holders will have no obligation to sell the Shares hereunder, and no party will have any further obligation hereunder except that the Company must promptly return the EnCap Certificates to the Holders.

     (b) Either the Company or the Holders may terminate this Agreement if the Placement Agreement has not been executed and delivered by the parties thereto on or before January 31, 2006.

     6.9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any party may execute this Agreement by the delivery of a facsimile signature, which signature shall have the same force and effect as an original signature. Any party that delivers a facsimile signature shall promptly thereafter deliver an originally executed signature to the other party; provided, however, that the failure to deliver an original signature page shall not affect the validity of any signature delivered by facsimile.

[Signature Page Follows]

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officer as of the date first written above.

PETROHAWK ENERGY CORPORATION

By:

Name:

Title:

ENCAP IV-B ACQUISITIONS, L.P.
By:	EnCap IV-B Acquisitions GP, LLC,
	General Partner of EnCap IV-B Acquisitions, L.P.
By:	EnCap Energy Capital Fund IV-B, L.P.,
	Sole Member of EnCap IV-B Acquisitions GP, LLC
By:	EnCap Equity Fund IV GP, L.P.,
	General Partner of EnCap Energy Capital Fund IV-B, L.P.
By:	EnCap Investments L.P.,
	General Partner of EnCap Equity Fund IV GP, L.P.
By:	EnCap Investments GP, L.L.C.,
	General Partner of EnCap Investments L.P.

By:
Name:
Title:	Senior Managing Director

ENCAP ENERGY CAPITAL FUND IV, L.P.
By:	EnCap Equity Fund IV GP, L.P.,
	General Partner of EnCap Energy Capital Fund IV, L.P.
By:	EnCap Investments L.P.,
	General Partner of EnCap Equity Fund IV GP, L.P.
By:	EnCap Investments GP, L.L.C.,
	General Partner of EnCap Investments L.P.

By:
Name:
Title:	Senior Managing Director

Execution Copy

Schedule I
to Stock Purchase Agreement

HOLDER	SHARES
ENCAP IV-B ACQUISITIONS, L.P.		1,047,157
ENCAP ENERGY CAPITAL FUND IV, L.P.		2,275,284
TOTAL		3,322,441

EX-10.33

EXHIBIT 10.33

13,000,000 Shares of

PETROHAWK ENERGY CORPORATION

Common Stock

PLACEMENT AGREEMENT

January 25, 2006

Lehman Brothers Inc.
Friedman, Billings, Ramsey & Co., Inc.
c/o Lehman Brothers Inc.
745 Seventh Avenue, Third Floor
New York, New York 10019

Ladies and Gentlemen:

     Petrohawk Energy Corporation, a Delaware corporation (the “Company”) proposes, upon the terms and conditions set forth herein, to issue and sell to certain purchasers (each a “Purchaser” and, collectively, the “Purchasers”), pursuant to the terms of this Placement Agreement (this “Agreement”), an aggregate of 13,000,000 shares (the “Stock”) of the Company’s common stock, par value $.001 per share (the “Common Stock”).

     Lehman Brothers Inc. (“Lehman”) and Friedman, Billings, Ramsey & Co., Inc. (together with Lehman, the “Placement Agents”), will act as placement agents to solicit offers in connection with the Company’s offer and sale to certain (i) Accredited Investors (as such term is defined in Regulation D (“Regulation D”) under the Securities Act of 1933, as amended (the “Securities Act”) and (ii) non-United States persons pursuant to offers and sales of the Stock that occur outside the United States (“Non-US Persons”) within the meaning of Regulation S (“Regulation S”) under the Securities Act, in each case, as set forth in the Private Placement Memorandum (as defined herein) under the heading “Private Placement.” The offer and sale of the shares described in the first sentence of this paragraph is referred to herein as the “Private Placement.”

     The offer and sale of the Stock to the Accredited Investors and the Non-US Persons will be made without registration under the Securities Act, and the rules and regulations (the “Securities Act Rules”) of the United States Securities and Exchange Commission (the “Commission”) thereunder, in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereunder.

     The Company has prepared a preliminary private placement memorandum, dated January 11, 2006 (the “Preliminary Private Placement Memorandum”), and the Company hereby agrees to prepare prior to close of business on the business day immediately following the execution and delivery of this Agreement in a form approved by the Placement Agents, a final private placement memorandum (the “Private Placement Memorandum”), in each case, setting forth information regarding the Company, its subsidiaries (as defined in Section 16) and the Stock, and to make no further amendment or supplement prior to the Closing Date except as provided herein. The Company hereby confirms that it has authorized the use of the Private Placement Memorandum by the Placement Agents in connection with the Private Placement.

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     Holders (including subsequent transferees) of the Stock will have the registration rights set forth in the form of registration rights agreement attached hereto as Exhibit A (the “Registration Rights Agreement”) among the Company and the Placement Agents to be dated as of the Closing Date (as defined below), for so long as such Stock constitutes “Registrable Securities” (as defined in the Registration Rights Agreement). Pursuant to, and subject to the terms of, the Registration Rights Agreement, the Company will agree to file with the Commission, under the circumstances set forth therein, a shelf registration statement (the “Registration Statement”) on Form S-3 or such other appropriate form pursuant to Rule 415 under the Securities Act registering the offer and resale by holders of Stock constituting Registrable Shares, and to use its reasonable best efforts to cause any such registration statement to become effective.

     1. Representations and Warranties and Agreements of the Company. The Company represents and warrants to, and agrees with, the Placement Agents and the Purchasers that:

     (a) No order or decree preventing the use of the Preliminary Private Placement Memorandum or the Private Placement Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act has been issued and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company, is contemplated.

     (b) The Preliminary Private Placement Memorandum as of the date hereof does not, and the Private Placement Memorandum as of the Closing Date will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Preliminary Private Placement Memorandum or the Private Placement Memorandum in reliance upon and in conformity with written information furnished to the Company by either Placement Agent specifically for inclusion therein.

     (c) All documents (the “Exchange Act Reports”) filed by the Company under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder.

     (d) The documents incorporated by reference in the Preliminary Private Placement Memorandum did not, and any further documents filed and incorporated by reference in the Private Placement Memorandum will not, when filed with the Commission, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

     (e) The Company has furnished to the Purchasers all of the information specified in, and meeting the requirements of, Rule 502(b)(2)(ii) under the Securities Act.

     (f) Assuming the Placement Agents’ representations and warranties in Section 2 are true, the Private Placement is exempt from the registration requirements of the Securities Act.

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     (g) No form of general solicitation or general advertising within the meaning of Regulation D (including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) was used by the Company or any of its affiliates or representatives (other than the Placement Agents and their respective affiliates and representatives, as to whom the Company makes no representation) in connection with the offer and sale of the Stock.

     (h) During the six-month period preceding the date of the Private Placement Memorandum, neither the Company, nor any of its subsidiaries, or any of their respective officers and directors, has, whether directly or through any agent or person acting on behalf of the Company (other than the Placement Agents): (i) offered Stock or any other securities convertible into or exchangeable or exercisable for Stock in a manner in violation of the Securities Act or Securities Act Rules, (ii) distributed any other offering material in connection with the offer and sale of the Stock, other than the Marketing Materials (as defined below) and as described in or incorporated by reference in the Private Placement Memorandum, or (iii) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of any security (as defined in the Securities Act) which is or will be integrated with the Private Placement in a manner that would require the registration of the offer or sale by the Company of the Stock under the Securities Act.

     (i) The Registration Rights Agreement will conform in all material respects to the summary description thereof in the Private Placement Memorandum.

     (j) Each of the Company and its subsidiaries has been duly organized, is validly existing and is in good standing as a corporation or other business entity under the laws of its jurisdiction of organization and is duly qualified to do business and in good standing as a foreign corporation or other business entity in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, except where the failure to be so qualified or in good standing, individually or in the aggregate, could not reasonably be expected to cause, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), results of operations, stockholders’ equity, properties or business of the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”). Each of the Company and its subsidiaries has all corporate or other power and authority necessary to own or hold its properties and to conduct its business in all material respects as described in or incorporated by reference in the Private Placement Memorandum. The Company does not own or control, directly or indirectly, any corporation, partnership, company, association or other entity other than the subsidiaries listed in Schedule 1 attached to this Agreement. None of the subsidiaries of the Company (other than Petrohawk Operating Company, Petrohawk Holdings, LLC and Petrohawk Properties, LP) (collectively, the “Significant Subsidiaries”) is a “significant subsidiary” (as defined in Rule 405 of the Securities Act Rules).

     (k) The Company has an authorized capitalization as set forth in or incorporated by reference in the Private Placement Memorandum, and all of the issued shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and non-assessable, conform to the description thereof contained in or incorporated by reference in

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the Private Placement Memorandum and were issued in compliance with federal and state securities laws and not in violation of any preemptive right, resale right, right of first refusal or similar right. All of the Company’s options, warrants and other rights to purchase or exchange any securities for shares of the Company’s capital stock have been duly authorized and validly issued, conform to the description thereof contained in or incorporated by reference in the Private Placement Memorandum and were issued in compliance with federal and state securities laws. All of the issued shares of capital stock of each of its subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except for such liens, encumbrances, equities or claims as set forth in or incorporated by reference in the Private Placement Memorandum and those that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     (l) The shares of the Stock to be issued and sold by the Company to the Purchasers hereunder have been duly authorized and, upon payment and delivery in accordance with this Agreement, will be validly issued, fully paid and non-assessable, will conform to the description thereof contained in or incorporated by reference in the Private Placement Memorandum, assuming the accuracy of the representations and warranties in Section 2, will be issued in compliance with federal and state securities laws and will be free of statutory and contractual preemptive rights, rights of first refusal and similar rights.

     (m) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Company.

     (n) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement. The Registration Rights Agreement has been duly authorized by the Company and, when executed and delivered by the Company in accordance with the terms hereof and thereof, will be validly executed and delivered and (assuming the due authorization, execution and delivery thereof by the Placement Agents) will be the legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditor’s rights generally, by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and, as to rights of indemnification and contribution, by principles of public policy.

     (o) The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company, the consummation of the transactions contemplated hereby and thereby, the application of the proceeds from the sale of the Stock as described under “Use of Proceeds” in the Private Placement Memorandum and the compliance by the Company with all of the provisions of this Agreement and the Registration Rights Agreement and the consummation of the transactions contemplated hereby and thereby will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries, or constitute a default under, any indenture,

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mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws of the Company or the charter, by-laws, partnership agreement, limited liability company agreement or similar organizational documents of any of its subsidiaries or (iii) result in any violation of any statute (assuming the accuracies of the representations set forth in Section 2) or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets which conflicts, breaches, violations or defaults, in the case of clause (i) or (iii), would, individually or in the aggregate, have a Material Adverse Effect or would materially impair the ability of the Company to perform its obligations under this Agreement.

     (p) Assuming the accuracy of the representations set forth in Section 2, no consent, approval, authorization or order of, or filing, registration or qualification with any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their property or assets (each, a “Consent”) is required for the execution, delivery and performance of this Agreement or the Registration Rights Agreement by the Company, the consummation of the transactions contemplated hereby and thereby and the application of the proceeds from the sale of the Stock as described under “Use of Proceeds” in the Private Placement Memorandum, except for (i) such Consents as may be required under state securities or Blue Sky laws or foreign laws or (ii) in the case of the consummation of the transactions contemplated by the Registration Rights Agreement, for registration of the offer and resale of the Stock under the Securities Act and under the rules of the National Association of Securities Dealers, Inc. with respect to the purchase and distribution of the Stock by underwriters in connection therewith. Except as described in or incorporated by reference in the Private Placement Memorandum, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company (other than the Registration Rights Agreement) owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Rights Agreement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act.

     (q) Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included or incorporated by reference in the Private Placement Memorandum, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, except as could not reasonably be expected to have a Material Adverse Effect; and except as set forth in the Private Placement Memorandum, since such date, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any adverse change, in or affecting the condition (financial or otherwise), results of operations, stockholders’ equity, properties, management or business of the Company and its subsidiaries, taken as a whole, except as could not reasonably be expected to have a Material Adverse Effect.

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     (r) Since the date as of which information is given in the Private Placement Memorandum and except as may otherwise be described in the Private Placement Memorandum, including the documents incorporated by reference therein as of the date hereof, the Company has not (i) incurred any liability or obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (ii) entered into any material transaction not in the ordinary course of business or (iii) declared or paid any dividend on its capital stock.

     (s) The historical financial statements (including the related notes and supporting schedules) included in the Private Placement Memorandum present fairly in all material respects the financial condition, results of operations and cash flows of the entities purported to be shown thereby at the dates and for the periods indicated and have been prepared in conformity with accounting principles generally accepted in the United States applied on a consistent basis throughout the periods involved, except as otherwise stated therein.

     (t) The pro forma financial information and operating data included or incorporated by reference in the Private Placement Memorandum include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical financial statement amounts in the pro forma financial statements included or incorporated by reference in the Private Placement Memorandum.

     (u) Deloitte & Touche LLP, who have certified certain financial statements of the Company and its consolidated subsidiaries, whose report appears in the Private Placement Memorandum or is incorporated by reference therein and who have delivered the initial letter referred to in Section 7(g) hereof, are independent public accountants as required by the Securities Act and the Securities Act Rules; and each of KPMG LLP, Ernst & Young LLP and Hein & Associates LLP, whose reports appear in the Private Placement Memorandum or are incorporated by reference therein, were independent public accountants as required by the Securities Act and the Securities Act Rules during the periods covered by the financial statements on which they reported contained or incorporated by reference in the Private Placement Memorandum.

     (v) Netherland Sewell & Associates, Inc. (the “Reservoir Engineer”), whose report appears in the Private Placement Memorandum or is incorporated by reference therein and who has delivered the letter referred to in Section 7(i) hereof, was, as of the date of such report, and is, as of the date hereof, an independent petroleum engineer with respect to the Company.

     (w) The information underlying the estimates of the Company’s proved reserves that was supplied to the Reservoir Engineer for the purposes of preparing the independent reserve reports and estimates of the proved reserves of the Company disclosed in the Private Placement Memorandum or incorporated by reference therein (such estimates, the “Audited Reserve Estimates”) and the Company’s internal estimates of its proved reserves which are disclosed in the Private Placement Memorandum (such internal estimates, the “Unaudited Reserve Estimates”), including, production, costs of operation, and, to the Company’s knowledge, future operations and sales of production, were true and correct in all material

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respects on the dates such information was provided, and such information was supplied and was prepared in accordance with customary industry practices; other than normal production of the reserves, product price fluctuations, and fluctuations of demand for such products, and except as disclosed in the Private Placement Memorandum, the Company is not aware of any facts or circumstances that would result in a materially adverse change in their reserves in the aggregate, or the aggregate present value of the future net cash flows therefrom as described in the Private Placement Memorandum and as reflected in the reserve reports prepared by the Reservoir Engineer or in the Unaudited Reserve Estimates; the Audited Reserve Estimates and Unaudited Reserve Estimates and present value as described in the Private Placement Memorandum and reflected in the reserve report referenced therein have been prepared in a manner that complies with the applicable requirements of Regulation S-X and Industry Guide 2 under the Securities Act.

     (x) Neither the Company nor any of its subsidiaries is, or after giving effect to the offering and sale of the Stock and upon application of the proceeds as described under the caption “Use of Proceeds” in the Private Placement Memorandum will be, (i) an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and the rules and regulations of the Commission thereunder or (ii) a “business development company” (as defined in Section 2(a)(48) of the Investment Company Act).

     (y) There are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject that could, in the aggregate, reasonably be expected to have a Material Adverse Effect or could, in the aggregate, reasonably be expected to have a material adverse effect on the performance of this Agreement or the consummation of the transactions contemplated hereby; and to the Company’s knowledge, no such proceedings are threatened or contemplated by governmental authorities or others.

     (z) No relationship, direct or indirect, that would be required to be described in a Company registration statement pursuant to Item 404 of Regulation S-K or otherwise exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that is not described in or incorporated by reference in the Private Placement Memorandum.

     (aa) No labor disturbance by the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent that could reasonably be expected to have a Material Adverse Effect.

     (bb) (i) Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Security Act of 1974, as amended (“ERISA”)) for which the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each a “Plan”) has been maintained, in all material respects, in compliance with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) with respect to each Plan subject to Title IV of ERISA (a) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to

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occur, (b) no “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, has occurred or is reasonably expected to occur, (c) the fair market value of the assets under each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan) and (d) neither the Company or any member of its Controlled Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the PBGC in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA); and (iii) each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

     (cc) The Company and each of its subsidiaries have filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof, subject to permitted extensions, and have paid all taxes due thereon, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries, nor does the Company have any knowledge of any tax deficiencies that could, in the aggregate, reasonably be expected to have a Material Adverse Effect.

     (dd) Neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws (or similar organizational documents), (ii) is in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or credit agreement, license or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) is in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it or its property or assets or has failed to obtain any license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, except in the case of clauses (ii) and (iii), to the extent any such conflict, breach, violation or default could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

     (ee) There is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply with the provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith.

     (ff) The Company and each of its subsidiaries has such permits, licenses, patents, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities (“Permits”) as are necessary under applicable law to own their properties and conduct their businesses in the manner described in the Private Placement Memorandum, except for any Permit which if not obtained could not reasonably be expected to have a Material Adverse Effect; the Company and each of its subsidiaries has fulfilled and performed all of its obligations with respect to the Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder or any such Permits, except for any of the foregoing that could not reasonably be expected to have a Material Adverse Effect.

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     (gg) The Company and each of its Significant Subsidiaries owns or possesses adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conduct of their respective businesses as presently conducted and have no reason to believe that the conduct of their respective businesses will in any material respect conflict with, and have not received any notice of any claim of conflict with, any such rights of others in any material respect.

     (hh) The Company and each of its Significant Subsidiaries have (i) legal, valid and defensible title to the interests in its natural gas and oil properties underlying the Company’s estimates of its net proved reserves contained in the Private Placement Memorandum, (ii) good and marketable title in fee simple to all real property and (iii) good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except such as are described in the Private Placement Memorandum and except for any of the foregoing that would not reasonably be expected to have a Material Adverse Effect; and all assets held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as would not reasonably be expected to have a Material Adverse Effect.

     (ii) The Company and each of its subsidiaries (i) are in compliance with all laws, regulations, ordinances, rules, orders, judgments, decrees, permits or other legal requirements of any governmental authority, including without limitation any international, national, state, provincial, regional, or local authority, relating to the protection of human health and safety, the environment, or natural resources, or to hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) applicable to such entity, which compliance includes obtaining, maintaining and complying with all permits and authorizations and approvals required by Environmental Laws to conduct their respective businesses, and (ii) have not received notice of any actual or alleged violation of Environmental Laws, or of any potential liability for or other obligation concerning the presence, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except in the case of clause (i) or (ii) where such non-compliance, violation, liability, or other obligation could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as described in the Private Placement Memorandum, (A) there are no proceedings that are pending, or known to be contemplated, against the Company or any of its subsidiaries under Environmental Laws in which a governmental authority is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, and (B) the Company and its subsidiaries are not aware of any issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that could reasonably be expected to have a Material Adverse Effect.

     (jj) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has (i) used any corporate funds for any

9

unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

     (kk) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened, except, in each case, as would not reasonably be expected to have a Material Adverse Effect.

     (ll) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

     (mm) The Company has not taken and will not take, directly or indirectly, any action designed to or that has constituted or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the shares of the Stock.

     (nn) The statements set forth under the captions “Material United States Federal Tax Considerations for Non-United States Holders”, “Business and Properties”, “The North Louisiana Acquisitions”, “Certain Relationships and Related Transactions”, “Registration Rights” and “Private Placement,” insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate in all material respects.

     (oo) Except as disclosed in the Private Placement Memorandum, the Company and its subsidiaries have insurance covering the properties, operations, personnel and businesses of the Company and its subsidiaries, which insurance is in amounts and insures against such losses and risks as are customary in the oil and gas industry; and neither the Company nor any subsidiary has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain comparable coverage at reasonable cost from similar insurers as may be necessary to continue its business.

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     (pp) Any certificate signed by any officer of the Company and delivered to the Placement Agent or counsel for the Placement Agent in connection with the offering of the Stock shall be deemed a representation and warranty by the Company, as to the matters covered thereby, to the Placement Agent and the Purchasers.

     2. Representations, Warranties and Agreements of the Placement Agents. Each Placement Agent hereby represents and warrants to the Company and to each other that such Placement Agent:

     (a) has not solicited and will not solicit offers or sales of the Stock on behalf of the Company except in accordance with this Agreement and on the terms contemplated by the Private Placement Memorandum;

     (b) has not, nor has any of its Affiliates (as such term is defined in Regulation D), nor has any person acting on their behalf, engaged in any form of general solicitation or general advertising (within the meaning of Regulation D, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising);

     (c) has not, nor has any of its Affiliates, nor has any person acting on their behalf, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Stock under the Securities Act;

     (d) has not distributed and will not distribute any offering materials in connection with the Private Placement of the Stock other than the Preliminary Private Placement Memorandum, the Private Placement Memorandum, the Marketing Materials and such additional material as may be furnished to the Placement Agents specifically by the Company for such purpose; and

     (e) is registered as a broker-dealer under the Exchange Act and is a member in good standing of the National Association of Securities Dealers, Inc.

     3. Private Placement of Securities. On the basis of the representations, warranties and agreements contained in, and subject to the conditions of this Agreement, the Company and the Placement Agents agree as follows:

     (a) The Company shall offer and sell the Stock to Purchasers who have subscribed pursuant to the terms and conditions set forth in the subscription agreements substantially in the forms attached to the Private Placement Memorandum as Annexes A, B and C, as applicable (each a “Subscription Agreement”). The Stock will be sold by the Company pursuant to this Agreement at a price equal to $14.50 per share (the “Purchase Price”). The Placement Agents shall have no liability to the Company in the event any such purchase is not consummated for any reason. Under no circumstances will the Placement Agents be obligated to purchase any Stock for its own account and, in soliciting purchases of the Stock, the Placement Agents shall act solely as the Company’s agent and not as principal.

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     (b) As compensation for the services to be provided by the Placement Agents in connection with the Private Placement, the Company shall pay to the Placement Agents on the Closing Date an amount equal to $0.595 for each share of the Stock sold at such time (the “Placement Fee”), with each Placement Agent receiving an amount equal to 50% of the Placement Fee.

     (c) The Placement Agents shall be the sole agents of the Company in connection with the Private Placement and in such capacity may arrange for the private offer and sale of the Stock by the Company under restrictions and other circumstances designed to preclude a distribution of the Stock that would require registration of the Stock under the Securities Act. Offers for the purchase of the Stock may be solicited solely by the Placement Agents, as agents for the Company, at such times and in such amounts as the Placement Agents deem advisable.

     (d) Offers by the Placement Agents on behalf of the Company shall be made only to Accredited Investors and Non-US Persons (which may include affiliates of the Placement Agents) with whom a Placement Agent has an existing relationship. The Placement Agents will not engage in a general solicitation or utilize general advertising within the meaning of Regulation D in connection with the offering of the Stock.

     (e) Prior to the earlier of the date on which this Agreement is terminated and the Closing Date, neither the Company nor any other person or entity on behalf of the Company shall, without the prior consent of the Placement Agents, solicit or accept offers to purchase Stock (other than pursuant to the exercise of options or warrants or convertible securities evidencing the right to purchase shares of Common Stock that are outstanding at the date hereof) otherwise than through the Placement Agents.

     (f) The Company shall have the sole right to accept offers to purchase the Stock and may reject any such offer, in whole or in part and any such rejection shall not be deemed a breach of its agreements contained herein. The Placement Agents shall have the right, in their discretion reasonably exercised, without notice to the Company, to reject any offer to purchase the Stock received by them, in whole or in part, and any such rejection shall not be deemed a breach of their agreements contained herein.

     (g) Concurrently with the execution and delivery of this Agreement, the Placement Agents and The Bank of New York, as escrow agent (the “Escrow Agent”), shall enter into an Escrow Agreement substantially in the form of Exhibit B attached hereto (the “Escrow Agreement”), pursuant to which an escrow account will be established, at the Company’s expense, for the benefit of the Purchasers (the “Escrow Account”). Prior to the Closing Date each of the Purchasers will deposit in the Escrow Account an amount equal to the Purchase Price multiplied by the number of shares of Stock to be purchased by such Purchaser (the “Escrow Funds”).

     (h) As compensation for services rendered, on the Closing Date a cash amount equal to the aggregate Placement Fee plus the expenses which the Company has agreed to reimburse hereunder shall be released to the Placement Agents directly out of the Escrow Account.

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     (i) The Company shall sell the Stock only to persons that have provided the Company a fully completed and executed Subscription Agreement in the form of Annex A, B or C, as applicable, to the Private Placement Memorandum.

     (j) No Stock which the Company has agreed to sell pursuant to this Agreement shall be deemed to have been purchased and paid for, or sold by the Company, until such Stock shall have been delivered to the Purchaser thereof against payment by such Purchaser. If the Company shall default in its obligations to deliver Stock to a Purchaser whose offer it has accepted, and from which it has received payment for such Stock, the Company shall indemnify and hold the Placement Agents harmless against any loss, claim or damage arising from or as a result of such default by the Company, as the case may be.

     (k) The Stock may be resold or otherwise transferred by the holders thereof only if the offer and sale of such Stock is registered under the Securities Act or if an exemption from registration is available. The Private Placement Memorandum shall state that the offer and sale of the Stock has not been and will not be registered (other than pursuant to the Registration Rights Agreement) under the Securities Act, and that no resale or other transfer of any Stock or any interest therein prior to the date that is two years (or such shorter period as is prescribed by Rule 144(k) under the Securities Act as then in effect) after the later of the original issuance of such Stock and the last date on which the Company or any “affiliate” (as defined in Rule 144 under the Securities Act) of the Company was the owner of such Stock may be made by a purchaser of such Stock except as follows:

     (i) to the Company or any subsidiary thereof,

     (ii) pursuant to offers and sales that occur outside of the United States within the meaning of Regulation S under the Securities Act,

     (iii) pursuant to a registration statement that has been declared effective under the Securities Act,

     (iv) to an Accredited Investor that is acquiring the Stock for his, her or its own account or an investment adviser who is acquiring the Stock for the account of an Accredited Investor for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof, or

     (v) pursuant to any other available exemption from the registration requirements of the Securities Act,

in each case in accordance with any applicable federal securities laws and the securities laws of any state of the United States or other jurisdiction.

     (l) The Company shall take reasonable precautions designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Securities Act) of any Common Stock or any substantially similar security issued by the Company, within six months subsequent to the date on which the distribution of the Stock has been completed (as notified to the Company by the Placement Agents), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Stock in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Securities Act, including any sales of Common Stock hereunder pursuant to Regulation D.

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     4. Payment and Delivery. The closing of the Private Placement shall be held at the Houston office of Akin Gump Strauss Hauer & Feld LLP, 1111 Louisiana Street, 44^th Floor, Houston, Texas 77002 at 10:00 a.m., New York City time, on the fifth full business day following the date of this Agreement or at such other date or place as shall be agreed upon by the Placement Agents and the Company. The date and time at which payment and delivery are actually made is hereinafter sometimes referred to as the “Closing Date”. On the Closing Date, subject to the satisfaction of the closing conditions set forth herein, the Placement Agents shall cause to be released from the Escrow Account to an account of the Company designated to the Placement Agents in writing, by wire transfer of immediately available funds, the aggregate Purchase Price for the Stock received prior to the Closing Date (net of an amount equal to the aggregate Placement Fee and the fees and expenses which the Company has agreed to reimburse hereunder) against the Company’s irrevocable instruction to its transfer agent to deliver certificates of Stock to each Purchaser.

     5. Covenants of the Company. The Company agrees with the Placement Agents that:

     (a) The Company shall furnish to the Placement Agents, without charge, such number of copies of the Preliminary Private Placement Memorandum and the Private Placement Memorandum and any amendment or supplement thereto as the Placement Agents may reasonably request.

     (b) The Company shall not make any amendment or supplement to the Preliminary Private Placement Memorandum or the Private Placement Memorandum of which the Placement Agents shall not previously have been advised or to which the Placement Agents shall reasonably object after being so advised.

     (c) If, at any time prior to completion of the distribution of the Stock, any event occurs or information becomes known that, in the judgment of the Company or in the opinion of counsel for the Placement Agents, should be set forth in the Private Placement Memorandum so that the Private Placement Memorandum does not include any untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is otherwise necessary to supplement or amend the Private Placement Memorandum in order to comply with any law, the Company shall forthwith prepare an appropriate supplement or amendment thereto, and will expeditiously furnish to the Placement Agents a reasonable number of copies thereof.

     (d) The Company shall cooperate with the Placement Agents and with their counsel in connection with the qualification of the offering and sale of the Stock under the securities or Blue Sky laws of such jurisdictions as the Placement Agents may designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such qualification; provided, that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Stock, in any jurisdiction where it is not now so subject.

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     (e) Neither the Company nor any of its Affiliates shall solicit any offer to buy or offer to sell the Stock by means of any form of general solicitation or general advertising (within the meaning of Regulations D, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising).

     (f) Until the third anniversary of the Closing Date, the Company shall furnish to the holders of the Stock (i) as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, (ii) as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the first such fiscal quarter ending after the date of the Private Placement Memorandum), will make available to its securityholders consolidated summary financial information of the Company and each of its subsidiaries for such quarter in reasonable detail prepared, in each case, in accordance with the requirements of the Exchange Act and the rules and regulations promulgated thereunder applicable to companies whose shares are registered under Section 12(g) of the Exchange Act; provided, however, that for so long as the Company shall file Exchange Act Reports in accordance with the rules and regulations under the Exchange Act, the Company will be deemed to have satisfied the covenant in this Section 5(e) if the information required to be furnished hereunder is included in any Exchange Act Reports.

     (g) Until the third anniversary of the Closing Date, the Company shall furnish to the Placement Agents (i) as soon as available, a copy of each report of the Company mailed to stockholders generally or filed with any stock exchange or regulatory body, which obligation shall be deemed satisfied if an electronic copy of each such report is publicly available for a reasonable period of time after the date of any such mailing or filing (ii) from time to time such other information concerning the Company as the Placement Agents may reasonably request, and (iii) during any period in the two years (or such shorter period as may then be applicable under the Securities Act regarding the holding period for securities under Rule 144(k) under the Securities Act or any successor rule) after the Closing in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon request by the Placement Agents or any holder of such Stock, the information specified in Rule 144A(d)(4) under the Securities Act.

     (h) The Company shall apply the net proceeds from the sale of the Stock to be sold by the Company substantially in accordance with the description set forth in the Private Placement Memorandum under the caption “Use of Proceeds.”

     (i) Except as stated in this Agreement and in the Private Placement Memorandum, neither the Company nor any of its Affiliates shall take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale of the Stock.

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     (j) Prior to the Closing Date, the Company shall not, and the Company shall not permit any subsidiary to, issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for communications in the ordinary course of business and consistent with the past practices of the Company and of which the Placement Agents are notified), without the prior consent of the Placement Agents, unless in the judgment of the Company and its counsel, and after notification to the Placement Agents, such press release or communication is required by law.

     (k) Prior to the Closing Date, the Company shall promptly disclose to the Placement Agents in writing any information that gives the Company any reason to believe that any of the conditions set forth in Section 7 will not be satisfied as of the Closing Date.

     (l) The Company shall supply the Placement Agents with copies of all correspondence to and from, and all documents issued to and by, the Commission in connection with or with respect to the Private Placement, if any.

     (m) For a period beginning on the date hereof and ending on the date 30 days after the date the Registration Statement is declared effective (the “Lock-Up Period”), the Company shall not, directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or securities convertible into or exchangeable for Common Stock (other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights), or sell or grant options, rights or warrants with respect to any shares of Common Stock or securities convertible into or exchangeable for Common Stock (other than the grant of options pursuant to option plans existing on the date hereof), (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, (3) file or cause to be filed a registration statement with respect to any shares of Common Stock or securities convertible, exercisable or exchangeable into Common Stock or any other securities of the Company or (4) publicly disclose the intention to do any of the foregoing, in each case without the prior written consent of the Placement Agents, which consents shall not be unreasonably withheld; provided, however, that, if (A) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs or (B) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, then the restrictions imposed in the preceding paragraph shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or the occurrence of the material event, unless the Placement Agents waive such extension in writing.

     (n) The Company shall cause each officer and director of the Company set forth on Schedule 2 hereto to furnish to the Placement Agents, prior to the Closing Date, a letter or letters, substantially in the form of Exhibit C-1 hereto (the “D&O Lock-Up Agreements”), and cause each stockholder of the Company set forth on Schedule 2 hereto to furnish to the Placement Agents, prior to the Closing Date, a letter or letters, substantially in the form of Exhibit C-2 hereto (together with the D&O Lock-Up Agreements, the “Lock-Up Agreements”).

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     (o) The Company shall furnish to the Placement Agents such further information, certificates and documents as the Placement Agents may reasonably request and shall do and perform all things required or necessary to be done and performed under this Agreement by it prior to the Closing Date, and satisfy all conditions precedent to the Placement Agents’ obligations hereunder.

     6. Expenses. The Company agrees, whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, to pay all costs, expenses, fees and taxes incident to and in connection with (a) the authorization, issuance, sale and delivery of the Stock and any stamp duties or other taxes payable in that connection, and the preparation and printing of certificates for the Stock; (b) the preparation and printing of the Preliminary Private Placement Memorandum and the Private Placement Memorandum (including all annexes thereto) and any amendment or supplement thereto; (c) the distribution of the Preliminary Private Placement Memorandum and the Private Placement Memorandum (including any exhibits thereto) and any amendment or supplement thereto, or any document incorporated by reference therein, all as provided in this Agreement; (d) the production and distribution of this Agreement, the Registration Rights Agreement, any supplemental agreement among Placement Agents, and any other related documents in connection with the offering, purchase, sale and delivery of the Stock; (e) the qualification of the Stock for offer and sale under the securities laws of the several jurisdictions and the determination of its eligibility for investment under state law (including any filing fees and the reasonable legal fees and other disbursements of the Placement Agents); (f) the preparation, printing and distribution of a Blue Sky Memorandum (including related fees and expenses of counsel to the Placement Agents); (g) the investor presentations on any “road show” undertaken in connection with the marketing of the Stock, including, without limitation, expenses associated with any electronic roadshow, travel and lodging expenses of the representatives and officers of the Company and the cost of any aircraft chartered in connection with the road show; (h) the reasonable out-of-pocket expenses incurred by the Placement Agents in connection with their services under this Agreement (including the fees and disbursements of the Placement Agents’ legal counsel and external advisors); and (i) all other costs and expenses incident to the performance of the obligations of the Company.

     7. Conditions to the Obligations of the Placement Agents. The obligations of the Placement Agents to privately place the Stock pursuant to this Agreement are subject to the accuracy, when made and on the Closing Date, of the representations and warranties on the part of the Company contained herein, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company in all material respects to the extent not otherwise qualified by materiality, and in all respects to the extent qualified by materiality, of their respective obligations hereunder, and to each of the following additional terms and conditions:

     (a) No order or decree preventing the use of the Preliminary Private Placement Memorandum or the Private Placement Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act shall have been issued and no proceeding for that purpose shall have commenced or is pending or, to the knowledge of the Company, is contemplated.

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     (b) The Placement Agents shall not have discovered and disclosed to the Company that the Private Placement Memorandum or any amendment or supplement thereto contains an untrue statement of fact, which in the opinion of Akin Gump Strauss Hauer & Feld LLP, counsel to the Placement Agents, is material or omits to state a fact which, in the opinion of such counsel is material and is required to be stated therein or is necessary to make the statements therein not misleading.

     (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Stock, the Registration Rights Agreement, and the Private Placement Memorandum, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Placement Agents, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

     (d) Thompson & Knight LLP shall have furnished to the Placement Agents its written opinion, as counsel to the Company, addressed to the Placement Agents and dated the Closing Date, substantially in the form of Exhibit D hereto.

     (e) The Placement Agents shall have received from Akin Gump Strauss Hauer & Feld LLP, counsel for the Placement Agents, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Stock, the Private Placement Memorandum and other related matters as the Placement Agents may reasonably require, and the Company shall have furnished to such counsel such documents and information as they reasonably request for the purpose of enabling them to pass upon such matters.

     (f) At the time of execution of this Agreement, the Placement Agents shall have received from each of Deloitte & Touche LLP, KPMG LLP and Hein & Associates a letter, in form and substance reasonably satisfactory to the Placement Agents, addressed to the Placement Agents and dated the date hereof (i) confirming that they are independent registered public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Preliminary Private Placement Memorandum, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and (iii) covering such other matters as are ordinarily covered by accountants’ “comfort letters” to underwriters in connection with registered public offerings.

     (g) With respect to the letters of Deloitte & Touche LLP, KPMG, LLC and Hein & Associates referred to in the preceding paragraph and delivered to the Placement Agents concurrently with the execution of this Agreement (the “initial letter”), the Company shall have furnished to the Placement Agents a letter (the “bring-down letter”) of such accountants, addressed to the Placement Agents and dated the Closing Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the

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Closing Date (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Private Placement Memorandum, as of a date not more than five days prior to the date of the Closing Date), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter.

     (h) Except as described in the Private Placement Memorandum, neither the Company nor any of its subsidiaries shall have sustained, since the date of the latest audited financial statements included in the Private Placement Memorandum, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree; and, since such date, there shall not have been any change in the stockholders’ equity or long-term debt of the Company or any subsidiary that, and no event or events shall have occurred that, and no circumstance shall have become known that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

     (i) The Placement Agents shall have received from the Reservoir Engineer letters dated, respectively, as of the date hereof and the Closing Date, addressed to the Placement Agents and in form and substance satisfactory to the Placement Agents.

     (j) The Placement Agents shall receive a certificate of the Secretary of the Company certifying (i) the Certificate of Incorporation of the Company and any amendments thereto, (ii) the Bylaws of the Company and any amendments thereto, (iii) that all corporate action has been taken on the part of the Company necessary to authorize the execution and delivery of the Agreement, the Registration Rights Agreement and the other offering documents and the transactions contemplated herein and therein, (iv) resolutions of the Board of Directors of the Company approving the original issuance and sale of the Stock to the Purchasers, and (v) a specimen common stock certificate.

     (k) The Placement Agents shall have received a certificate from the Company, dated as of the Closing Date, signed by its Chief Executive Officer and Chief Financial Officer on behalf of the Company stating, as applicable, that:

     (i) the representations and warranties of the Company (after giving effect to all qualifiers therein) are true and correct as if made on and as of such date (other than to the extent any such representation or warranty is made expressly as of a certain date), and the Company has performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such date;

     (ii) they have carefully examined the Private Placement Memorandum and, in their opinion, the Private Placement Memorandum, as of its date, did not, and, as of such date, does not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading except that such representation and warranty shall not apply to statements in or omissions from the Private Placement Memorandum made in reliance upon and

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in conformity with information relating to the Placement Agents furnished to the Company in writing by or on behalf of the Placement Agents expressly for use therein; and

     (iii) the issuance and sale of the Stock by the Company hereunder has not been enjoined (temporarily or permanently) by any court or governmental body or agency.

     (l) The Company shall have furnished to the Placement Agents a certificate, dated the date of such Delivery Time, of its Secretary certifying as of the Closing Date as to the incumbency and signatures of the officers or representatives of such entity authorized to sign this Agreement and the other documents delivered hereunder, together with evidence of the incumbency of such Secretary.

     (m) (i) Neither the Company nor any of its subsidiaries shall have sustained, since the date of the latest audited financial statements included or incorporated by reference in the Private Placement Memorandum, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree or (ii) except as described in the Private Placement Memorandum, since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, stockholders’ equity, properties, management or business of the Company and its subsidiaries taken as a whole, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Placement Agents, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Private Placement Memorandum.

     (n) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) of the Securities Act Rules and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities.

     (o) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the Nasdaq National Market or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, has been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction; (ii) a material disruption in securities settlement, payment or clearance services in the United States; (iii) a banking moratorium has been declared by Federal or state authorities; (iv) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity, crisis or emergency if, in the judgment of the Placement Agents, the effect of any such attack,

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outbreak, escalation, act, declaration, calamity, crisis or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Stock; or (v) the occurrence of any other calamity, crisis (including without limitation as a result of terrorist activities), or material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of the Placement Agents, impracticable or inadvisable to proceed with offering or delivery of the Stock being delivered on the Closing Date or that, in the judgment of the Placement Agents, would materially and adversely affect the financial markets or the markets for the Stock and other equity securities.

     (p) The Company shall have executed and delivered the Registration Rights Agreement, and the Placement Agents shall have received an original copy thereof, duly executed by the Company.

     (q) The Company and EnCap Investments, L.P. and each of its affiliates which hold of record or beneficially own shares of Common Stock (collectively, “EnCap”) shall have executed and delivered a stock purchase agreement (the “EnCap Purchase Agreement”), pursuant to which the Company shall have agreed to repurchase, and EnCap shall have agreed to sell, all of such shares of Common Stock held by EnCap (the “EnCap Share Repurchase”); and the Placement Agents shall have received a true, correct and complete of the EnCap Purchase Agreement, certified as to authenticity by an authorized officer of the Company.

     (r) The borrowing base under that certain senior revolving credit agreement, dated November 23, 2004 (the “Revolving Credit Agreement”), among the Company, the lenders from time to time party thereto, BNP Paribas, as administrative agent, Fleet National Bank, as syndication agent, and Fortis Capital Corp., U.S. Bank National Association and Key Bank, National Association as co-documentation agents, shall have been redetermined by the Lenders to be an amount equal to at least $350 million; and the Placement Agents shall have received a true, correct and complete copy of the notice of such redetermination from BNP Paribas, certified as to authenticity by an authorized officer of the Company.

     (s) The Company shall have received a written consent under the Revolving Credit Agreement from the “Majority Lenders” (as such term is defined therein) to the EnCap Share Repurchase; and the Placement Agents shall have received a true, correct and complete of such consent, certified as to authenticity by an authorized officer of the Company.

     (t) The Company shall have received a written consent under that certain Second Lien Term Loan, dated November 23, 2004, among the Company, the lenders from time to time party thereto, and BNP Paribas, as administrative agent, from the “Majority Lenders” (as such term is defined therein) to the EnCap Share Repurchase; and the Placement Agents shall have received a true, correct and complete of such consent, certified as to authenticity by an authorized officer of the Company.

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     (u) The Lock-Up Agreements among the Placement Agents and the officers, directors and stockholders of the Company set forth on Schedule 2 delivered to the Placement Agents on or before the date of this Agreement shall be in full force and effect on such Delivery Date.

     (v) In the event the number of shares of Common Stock to be repurchased by the Company from EnCap on the Closing Date shall be reduced to a number of shares equal to or less than 75% of the shares of Common Stock held of record or beneficially owned by EnCap as of the close of business on the business day immediately preceding the Closing Date, the Company shall have caused EnCap to furnish to the Placement Agents, prior to the Closing Date, a letter or letters, substantially in the form of Exhibit C-2 hereto, and such letter or letters shall be in full force and effect on the Closing Date.

     All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agents.

     8. Indemnification and Contribution.

     (a) The Company hereby agrees to indemnify and hold harmless the Placement Agents, their respective directors, officers and employees and each person, if any, who controls a Placement Agent within the meaning of Section 15 of the Securities Act (each a “Placement Agent Indemnified Party”), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to the offer and sale of the Stock), to which such Placement Agent Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Private Placement Memorandum or Private Placement Memorandum or in any amendment or supplement thereto, (B) in any Blue Sky application or other document prepared or executed by the Company (or based upon any written information furnished by the Company) specifically for the purpose of qualifying any or all of the Stock under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a “Blue Sky Application”) or (C) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Stock (“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically, (ii) the omission or alleged omission to state in any Preliminary Private Placement Memorandum or Private Placement Memorandum, or in any amendment or supplement thereto, or in any Blue Sky Application or in any Marketing Materials, any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or (iii) any act or failure to act or any alleged act or failure to act by the Placement Agents in connection with, or relating in any manner to, the Stock or the offering contemplated hereby, and that is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction (or an arbitrator in the event the parties agree to submit to binding arbitration; provided that nothing in this Agreement shall require any party to agree to participate in or be bound by any arbitration proceedings) that such loss,

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claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by the Placement Agents through its gross negligence or willful misconduct), and shall reimburse each Placement Agent Indemnified Party promptly upon demand for any legal or other expenses reasonably incurred by that Placement Agent Indemnified Party in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Private Placement Memorandum or Private Placement Memorandum, or in any such amendment or supplement thereto, or in any Blue Sky Application or in any Marketing Materials, in reliance upon and in conformity with written information concerning the Placement Agents furnished to the Company through the Placement Agents by or on behalf of the Placement Agents specifically for inclusion therein, which information consists solely of the information specified in Section 8(e). The foregoing indemnity agreement is in addition to any liability that the Company may otherwise have to any Placement Agent Indemnified Party.

     (b) Each Placement Agent, severally and not jointly, shall indemnify and hold harmless the Company and its directors, officers and employees, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act (each a “Seller Indemnified Party”), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Seller Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Private Placement Memorandum or Private Placement Memorandum or in any amendment or supplement thereto, (B) in any Blue Sky Application, or (C) in any Marketing Materials or (ii) the omission or alleged omission to state in any Preliminary Private Placement Memorandum or Private Placement Memorandum, or in any amendment or supplement thereto, or in any Blue Sky Application or in any Marketing Materials any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning the Placement Agents furnished to the Company by or on behalf of the Placement Agents specifically for inclusion therein, which information consists solely of the information specified in Section 8(e) and shall reimburse the Company and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability that the Placement Agents may otherwise have to any Seller Indemnified Party.

     (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any

23

liability that it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and; provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Placement Agents shall have the right to employ counsel to represent the Placement Agents and their respective directors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Placement Agents against the Company under this Section 8 if, (i) the Company and the Placement Agents shall have so mutually agreed; (ii) the Company has failed within a reasonable time to retain counsel reasonably satisfactory to the Placement Agents; (iii) the Placement Agents and their respective directors, officers, employees and controlling persons shall have reasonably conclude, based on advice of counsel that there may be legal defenses available to them that are different from or in addition to those available to the Company; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Placement Agents or their respective directors, officers, employees or controlling persons, on the one hand, and the Company on the other hand, and representation of both sets of parties by the same counsel would be inappropriate due to actual or potential differing interests between them, and in any such event the fees and expenses of such separate counsel shall be paid by the Company. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment.

     (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a), 8(b) or 8(c) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Placement Agents, on the other, from the offering of the Stock or

24

(ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Placement Agents, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Placement Agents, on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock in the Private Placement (before deducting expenses) received by the Company, on the one hand, and the total fees received by the Placement Agents with respect to the Stock offered and sold in the Private Placement, on the other hand, bear to the total gross proceeds from the offering of the Stock in the Private Placement. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Placement Agents, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Placement Agents agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), the Placement Agents shall not be required to contribute any amount in excess of the amount by which the aggregate Placement Fee paid to the Placement Agents exceeds the amount of any damages that the Placement Agents have otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Placement Agents’ obligations to contribute as provided in this Section 8(d) are several in proportion to their respective obligations and not joint.

     (e) The Placement Agents severally confirm and the Company acknowledges and agrees that the statements in the third paragraph appearing under the caption “Private Placement” in, the Preliminary Private Placement Memorandum and the Private Placement Memorandum are correct and constitute the only information furnished in writing to the Company by or on behalf of the Placement Agents specifically for inclusion in any Private Placement Memorandum, Blue Sky Application, Marketing Materials or in any amendment or supplement thereto.

     9. Termination. The obligations of the Placement Agents hereunder may be terminated by the Placement Agents by notice given to and received by the Company prior to delivery of and payment for the Stock if, prior to that time, any of the events described in Sections 7(h), 7(l) and 7(o) shall have occurred or if the Placement Agents shall decline to act as the placement agent to solicit offers in connection with the Private Placement of the Stock for any reason permitted hereunder.

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     10. Reimbursement of Placement Agents’ Expenses. If the Company fails to tender the Stock for delivery in connection with the Private Placement for any reason not permitted under this Agreement, the Company shall reimburse the Placement Agents for all reasonable out-of-pocket expenses (including fees and disbursements of counsel) incurred by the Placement Agents in connection with this Agreement and the proposed Private Placement, and upon demand the Company shall pay the full amount thereof to the Placement Agents.

     11. Research Independence. In addition, the Company acknowledges that the Placement Agents’ research analysts and research departments are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that the Placement Agents’ research analysts may hold and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the offering that differ from the views of their respective investment banking divisions. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Placement Agents with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by the Placement Agents’ investment banking divisions. The Company acknowledges that the Placement Agents are full service securities firms and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the companies which may be the subject of the transactions contemplated by this Agreement.

     12. No Fiduciary Duty. The Company acknowledges and agrees that in connection with the Private Placement or any other services the Placement Agents may be deemed to be providing hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between the parties or any oral representations or assurances previously or subsequently made by the Placement Agents: (i) no fiduciary or agency relationship between the Company and any other person, on the one hand, and either Placement Agent, on the other, exists; (ii) neither Placement Agent is acting as an advisor, expert or otherwise, to the Company, including, without limitation, with respect to the determination of the public offering price of the Stock, and such relationship between the Company, on the one hand, and the Placement Agents, on the other, is entirely and solely commercial, based on arms-length negotiations; (iii) any duties and obligations that the Placement Agents may have to the Company shall be limited to those duties and obligations specifically stated herein; and (iv) the Placement Agents and their affiliates may have interests that differ from those of the Company. The Company hereby waives any claims that the Company may have against the Placement Agents with respect to any breach of fiduciary duty in connection with the Private Placement.

     13. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and:

     (a) if to the Placement Agents, shall be delivered or sent by mail, overnight delivery or facsimile transmission to Lehman Brothers Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration (Fax: (646) 834-8133), and with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., 399 Park Avenue, New York, New York 10022 (Fax: (212) 520-0421); and

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     (b) if to the Company, shall be delivered or sent by mail, overnight delivery or facsimile transmission to the address of the Company set forth in the Private Placement Memorandum Attention: Chief Financial Officer (Fax: (832)-204-2877);

Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Placement Agents.

     14. Successors; Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Placement Agents and the Company and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the directors, officers and employees of the Placement Agents and each person or persons, if any, who control either Placement Agent within the meaning of Section 15 of the Securities Act and (b) the indemnity agreement of the Placement Agents contained in Section 8(c) of this Agreement shall be deemed to be for the benefit of the directors of the Company and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 14, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

     15. Survival. The respective indemnities, covenants, representations, warranties and agreements of the Company and the Placement Agents contained in this Agreement or made by or on behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Stock and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them.

     16. Definition of the Term “Business Day” and “subsidiary”. For purposes of this Agreement, (a) “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close and (b) “subsidiary” has the meaning set forth in Rule 405 of the Securities Act Rules.

     17. Jurisdiction. Each of the parties hereto irrevocably consents to the jurisdiction of the courts of the State of New York and the courts of the United States of America located in the Borough of Manhattan, City and State of New York, over any suit, action or proceeding with respect to this Agreement or the transactions contemplated hereby. Each of the parties hereto waives any objection that it may have to the venue of any suit, action or proceeding with respect to this Agreement or the transactions contemplated hereby in the courts of the State of New York or the courts of the United States of America, in each case, located in the Borough of Manhattan, City and State of New York or that such suit, action or proceeding brought in the courts of the State of New York or United States of America, in each case, located in the Borough of Manhattan, City and State of New York was brought in an inconvenient court and agrees not to plead or claim the same.

     18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York.

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     19. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument.

     20. Amendments or Waivers. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

     21. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

[Signature Page to Follow]

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     If the foregoing correctly sets forth the agreement between the Company and the Placement Agents, please indicate your acceptance in the space provided for that purpose below.

Very truly yours, PETROHAWK ENERGY CORPORATION
By:
	Name:
	Title:

Accepted and agreed to as of the date first above written:
LEHMAN BROTHERS INC.
By:
	Name:
	Title:
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By:
	Name:
	Title:

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

Subsidiary	Jurisdiction of Organization
1. Petrohawk Operating Company	Texas
2. P-H Energy, LLC	Texas
3. Red River Field Services, L.L.C.	Oklahoma
4. Petrohawk Holdings, LLC	Delaware
5. Petrohawk Properties, LP	Texas

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement Nos. 333-124899, 333-124898, 333-120881, 333-91496 and 333-45586 on Form S-3, No. 333-124391 on Form S-4 and Nos. 333-127011, 333-127012, 333-117733 and 333-45298 on Form S-8 of our report dated March 13, 2006, relating to the financial statements of Petrohawk Energy Corporation and management’s report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Petrohawk Energy Corporation for the year ended December 31, 2005.

/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 13, 2006

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Forms S-8, Nos. 333-117733, 333-45298, 333-127011 and 333-127012, Registration Statements on Form S-3, Nos. 333-120881, 333-91496, 333-45586, 333-124899, 333-124898 and Registration Statement on Form S-4, No. 333-124391 of Petrohawk Energy Corporation and in the related Prospectus of our report dated March 19, 2004, with respect to the consolidated financial statements of Beta Oil & Gas, Inc. included in the Annual Report (Form 10-K) of Petrohawk Energy Corporation for the year ended December 31, 2005.

/s/ Ernst & Young LLP

Tulsa, Oklahoma
March 9, 2006

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

As independent petroleum engineers, we hereby consent to the inclusion of the information included in this Form 10-K with respect to the oil and gas reserves of Petrohawk Energy Corporation as of the year ended December 31, 2005. We hereby further consent to all references to our firm included in this Form 10-K and to the incorporation by reference in the Registration Statements on Forms S-8, Nos. 333-117733 and 333-45298, and the Registration Statements on Form S-3, Nos. 333-120881, 333-94196 and 333-45586, of Beta Oil & Gas, Inc. of such information.

NETHERLAND, SEWELL & ASSOCIATES, INC.
By:	/s/ C.H. (Scott) Rees III
	C.H. (Scott) Rees III
	President and Chief Operating Officer

Dallas, Texas
March 10, 2006

Please be advised that the digital document you are viewing is provided by Netherland, Sewell & Associates Inc. (NSAI) as a convenience to our clients. The digital document is intended to be substantively the same as the original signed document maintained by NSAI. The digital document is subject to the parameters, limitations, and conditions stated in the original document. In the event of any differences between the digital document and the original document, the original document shall control and supersede the digital document.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Floyd C. Wilson, certify that:

1.	I have reviewed this annual report on Form 10-K of Petrohawk Energy Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on our evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006

/s/ Floyd C. Wilson

Floyd C. Wilson

Chairman of the Board, President and Chief Executive

Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Shane M. Bayless, certify that:

1.	I have reviewed this annual report on Form 10-K of Petrohawk Energy Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on our evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006

By: /s/ Shane M. Bayless

Shane M. Bayless

Executive Vice President, Chief Financial

Officer and Treasurer

EX-32

Exhibit 32

Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), Floyd C. Wilson, Chairman of the Board, President and Chief Executive, and Shane M. Bayless, Executive Vice President, Chief Financial Officer and Treasurer, of Petrohawk Energy Corporation, (the “Company”), each hereby certifies that, to the best of his knowledge:

(1) the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 13, 2006	/s/ Floyd C. Wilson
	Floyd C. Wilson
	Chairman of the Board, President and Chief Executive Officer
March 13, 2006	/s/ Shane M. Bayless
	Shane M. Bayless
	Executive Vice President, Chief Financial Officer and Treasurer

This certification accompanies this Form 10-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section.

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, the Company and furnished to the Securities and Exchange Commission or its staff upon request.